Critical Read

Study: LPTA sacrifices long-term value, stifles innovation

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What: A report released Oct. 24 by Market Connections and Centurion Research Solutions titled The New Reality: The impact of LPTA Procurements on Government Contracts and Solutions. 

Why: Lowest Price Technically Acceptable (LPTA) contracts drive down prices for government contracts, but 375 government contractors and 360 civilian and defense decision-makers in government polled in the survey suggest such contracts also drive down innovation and sacrifice long-term value for short-term cost savings. Results also suggest LPTA contracts could act to lower performance standards, resulting in less-desirable government solutions. While the study didn't focus explicitly on IT-related contractors, its significance is magnified given the current budgetary climate -- especially in IT, an area the government spends approximately $80 billion on each year. Most federal agencies are trying to keep pace with new technologies such as cloud computing in an effort to maximize value, but many are strapped for cash. In theory, LPTA contracts – paying the least possible amount for a deal that meets the technical specs required – are great, but the study suggests there are shortfalls to doing business that way.  

Verbatim: 

  • 65 percent of contractors and 43 percent of government employees believe that LPTA procurements sacrifice long-term value for short-term cost savings.
  • Both sides (71 percent contractors and 59 percent government) see the same two main drawbacks of LPTA for the federal government: The potential for contracts to be awarded to less qualified companies and sacrificing long-term value for short-term cost savings.
  • Contractors and feds believe LPTA procurements will increase in the next three years (59 percent contractors vs. 42 percent feds), driven primarily by federal budget restrictions.
  • Three-quarters of contractors polled indicated they are either very familiar or somewhat familiar (19 percent) with LPTA. About two-thirds of government employee respondents were either very familiar (32 percent) or somewhat familiar (33 percent) with LPTA.
  • Two-thirds of contractors (63 percent) are likely to equate a request for proposal specified as "best value" as an LPTA RFP despite the fact that best-value and LPTA differ by definition. Best value is an evaluation that compares cost and non-cost factors.

Click here for the full report.

About the Author

Frank Konkel is a former staff writer for FCW.

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Reader comments

Mon, Nov 4, 2013 Jaime Gracia Washington, DC

LPTA will continue to be the way government buys into the foreseeable future. The most alarming statistic is the huge gap between industry and government perceptions about sacrificing long-term value for short-term cost savings. Although a procurement may be "best value", I have seen and heard about so many instances of morphing the acquisition into LPTA at the end of the day, that industry needs to adapt in not only how they bid, but also how they deliver services. Regretfully, I have also seen acquisition personnel step in and choose the lowest bidder, even though another offeror won the contract. What also seems to be happening across the board is a drop off in performance; as government managers do not seem to understand that you do get what you pay for, a universal constant. Since so many federal managers have little to no industry experience (again look at the gaps between government and industry in just the article alone), combined with the abysmal state of communications between government and industry, government personnel think they can get the moon for peanuts. Expectations will need to be tempered, as the "good enough for government work" mantra is alive and well in the LPTA environment.

Fri, Oct 25, 2013

Simple as this - you get what you pay for

Fri, Oct 25, 2013 OccupyIT

LPTA is a crutch for lazy minds that think they are somehow tricking contractors and getting 'a good deal' for the USG. What they really continue to do is to underbuy (failing to meet requiring office needs leading to scope fights and expensive mods) from the least qualified provider. The exact same business objective should be reached using a Best Value Approach that states that cost is a very high evaluative criteria (not the usual lie that it is least and will only be used in a tie - pshaw!)

Thu, Oct 24, 2013 Peter G. Tuttle, CPCM, NCMA Fellow

I agree that we should expect to see more LPTA used over the next few years. Right or wrong - that's where we are since Federal agencies will be seeking cost reduction or avoidance by any means at their disposal. Until the Nation's overall spending challenges are addressed somehow, cost saving tactics like LPTA won't go away. Buyers and sellers continuing to have open, honest and continuous communications regarding Agency requirements and marketplace capabilities should help the greater acquisition community gain greater understanding of how Federal needs can be satisfied using the most appropriate contract types, LPTA being just one of a number of approaches that could be considered.

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