Industry resists government's push for low prices
- By Matthew Weigelt
- Oct 04, 2012
Industry is pushing back against defense officials’ most recent initiative to get the biggest bang for their buck – and suggesting changes to stress value over price.
The Better Buying Power Initiative was instituted in 2010 as a mandate for restoring affordability and productivity in defense spending. However, industry experts say the Defense Department has hindered private-sector attempts to create good competition and provide DOD with best value. Instead, critics say, officials left little room for flexibility to match the necessities of individual instances.
The core complaint is that DOD is adhering too closely to the initiative’s rules of three-year contract term limits and making the lowest price technically acceptable (LPTA) the main factor in a purchase. Buying smarter is not always about choosing the cheapest offer, said Larry Allen, president of Allen Federal Business Partners.
“It’s nice to sit in a senior policy office and talk about LPTA when in the field it’s been LP,” he said.
In September, the Professional Services Council offered ideas for modifications to the original Better Buying Power Initiative. In a letter on behalf of more than 350 member companies, PSC suggested Frank Kendall, undersecretary of defense for acquisition, technology and logistics, reconsider the contract term limits and the LPTA source-selection method.
PSC recommended the next round of the Better Buying Power Initiative instead take a balanced approach to regulating contract length, maximizing the appropriate use of “best value” procurement strategies, and even recognizing the importance of company profits by tying the profit margin to the nature of the work and its risk.
“How the government deploys its increasingly limited resources is more essential today than ever before,” Stan Soloway, PSC president and CEO, wrote. “Driving and rewarding high performance, innovation, and continuous improvement must remain at the core of the government’s acquisition objectives.”
Defense officials said they received the letter and welcome the input from industry.
“We will give industry a chance to comment on BBP 2.0 before making it final,” said a DOD spokeswoman Oct. 3, adding that it’s “a bit premature to comment yet on specific issues in BBP 2.0.”
In its letter, PSC recommended guidance reminding acquisition officials to tie contract length to the nature of the work. The main point of better buying is not the number of competitions DOD holds, PSC argued, but rather the quality of the requirements described in the request for proposals.
“The real goal of the department is quality and robust competition, rather than competition for its own sake,” wrote Soloway, who served nearly three years as the deputy undersecretary of defense for acquisition reform and, at the same time, as director of Defense Secretary William Cohen’s Defense Reform Initiative. “The key to driving quality competitions lies in the quality of the requirements, far more so than the frequency with which competitions are held.”
PSC also noted two LPTA trends that Soloway argued are troublesome for industry and government alike.
First, buyers are not applying the right LPTA procedures. Agencies, for example, are failing to open the technical proposals of companies that are not the lowest bidders. By closing that door, Soloway warned, the government will not learn about technical solutions that may better match the mission’s requirements.
“Focusing on the appropriate quality and technical requirements is essential, if often overlooked,” he wrote.
Second, DOD’s buyers are routinely using LPTA in circumstances where they should consider trading off cost for technical quality, especially in complex procurements.
“There is a strong consensus that LPTA source selection strategies have essentially become the default…approach, almost regardless of the nature of the requirements involved,” Soloway wrote. He cited the department’s purchase of audit readiness and preparation services as an example. Officials made awards on an LPTA basis, even though much of the accounting work is specialized and sophisticated.
While cost is of growing importance, Soloway acknowledged, he argued that industry experts believe defense officials are putting far too little effort into evaluating complex technical requirements, such as existing capabilities, a company’s past performance, and ongoing technology refresh. As a result, “the acquisition outcome is rarely beneficial to either the government or industry.”
Allen summed it up.
“I can sell you a 10-year-old Chevy for less money than a new one,” he said. But you’ll have to buy a new 10-year-old Chevy every other year.”