Critical Read

Study: LPTA sacrifices long-term value, stifles innovation

price illustration

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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