Government Contracts Monitor

Long-Awaited Limits on Lowest Price Technically Acceptable Procurements

March 23, 2015

Relief is on the way. Over the past several years the alarming increase in the use of LPTA procurements has been criticized, particularly where the government might realize “best value” from an innovative, cost-effective solution. This criticism has now gained an important voice and concrete support in the form of new Department of Defense (DOD) policy guidance urging “limited” use of LPTAs only in “appropriate circumstances.”

Specifically, on March 4, 2015, the Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall III, issued a Memorandum providing new guidance as to the “Appropriate Use of Lowest Priced Technically Acceptable Source Selection Process and Associated Contract Type.” Kendall stated that LPTA has “a clear, but limited place in the source selection ‘best value’ continuum.” LPTA is “appropriate ... only when there are well-defined requirements, the risk of unsuccessful contract performance is minimal, price is a significant factor in the source selection, and there is neither value, need, nor willingness to pay for higher performance.”

Kendall clarified that “[w]ell-defined requirements equates to technical requirements and ‘technical acceptability’ standards that are clearly understood by both industry and government, are expressed in terms of performance objectives, measures, and standards that map to [DOD] requirement documents, and lend themselves to technical evaluation on an acceptable/unacceptable basis.” He stated that “LPTA offers a streamlined and simplified source selection approach to rapidly procure … commercial and non-complex services and supplies.” According to Kendal, [u]sed in appropriate circumstances and combined with effective competition and proper contract type, LPTA can drive down costs and provide the best value solution.… If not applied appropriately, however, the Department can miss an opportunity to secure an innovative, cost-effective solution ... to help maintain our technological advantage.”

Kendall cited a vehicle maintenance contract with precise availability rates and scheduled maintenance requirements as a “good example” of an LPTA procurement. However, where “the tasks, efforts, and required outcomes” cannot be firmly predicted, a Cost-Plus-Fixed-Fee, Term, Level of Effort (CPFF LOE), or in some circumstances a Time-and-Materials (T&M) contract are better. Kendall reiterated DOD’s preference for CPFF LOE, which he stated is “well-suited” to professional and management services requirements, and provides greater flexibility and incentives for cost control, labor efficiencies and savings.

Hopefully, this new guidance will result in a more judicious and limited use of LPTA, at least within DOD. Based on this new DOD guidance, offerors should not hesitate to question and seek reassessment by higher level acquisition personnel when solicitations inappropriately use LPTA.