Finding a Bargain for Government Buyers Shouldn’t Be a Crime

Important programs are being starved of vital funding because of inadequate revenues, congressional gridlock and sequestration. But contractors, who bill taxpayers a whopping $500 billion annually for goods and services, hope to use the “acquisition reform” moniker to minimize the importance of cost-efficiency in the federal acquisition process.

The No. 1 objective of contractors is to demonize the low-price/technically acceptable source selection technique, known as LP/TA, so that its use is greatly limited if not proscribed.

Why do contractors heatedly complain when LP/TA is the most effective weapon in the Pentagon’s arsenal for cutting costs? Because the technique allows the Defense Department to get what warfighters need—technically acceptable goods and services from qualified contractors—at the least cost for taxpayers.

Contractors would prefer that DOD use a more expensive process called “best value,” which allows them to charge more for features that warfighters usually don’t need. The approach also emphasizes subjective concerns at the expense of containing costs and reduces competition among contractors.

Contractors complain that low-price/technically acceptable source selection results in inferior performance or quality because contracts are awarded to the most cut-rate bidders. Wrong. All contractors who are technically acceptable because they are judged capable of providing warfighters with the required level of performance also compete on the basis of price.

In a recent trade publication article, a contractor complained, “The government is getting exactly what they ask for—nothing more.” Exactly. A contractor who believes DOD should be asking for more can suggest additional features to the contracting officer, who can then include them in a new or revised solicitation, if necessary, so the most cost-efficient qualified contractor can then be identified.

Because of budget shortfalls, the Government Accountability Office reports that DOD is using LP/TA more frequently to generate savings. GAO, however, dismisses contractor allegations that such savings come at the expense of quality: “Best value processes continued to underlie the vast majority of DOD’s new, competitively awarded contracts. DOD has increased its use of the LP/TA process in recent years for higher value contracts, and its decision-making regarding which source selection process to use did not appear to be ill-advised.”

The real problem for contractors with LP/TA is that it reduces their profits. When DOD focuses on saving money by using a source selection process that emphasizes costs, contractor profits can’t help but suffer—the gravy train moves a little slower, the fountain of milk chocolate does not soar as high, and the bowls of caviar are not quite so full. In other words, contractors must make sacrifices—which are actually quite modest compared with the budget cuts and salary freezes experienced by federal employees.

Nevertheless, contractors’ disingenuous outrage at the Pentagon’s “war on profits” has put the department’s beleaguered acquisition leaders on the defensive. Solicitous lawmakers profess fear that LP/TA’s emphasis on costs will erode contractor confidence and undermine the industrial base. Think tanks produce paid-to-order research that purports to demonstrate a link between LP/TA and poor goods and services. Helpful trade publications breathlessly report every contractor complaint about LP/TA, however unfounded. The goal of this public relations campaign is to enact prohibitions on the use of LP/TA or to at least make the technique so controversial that acquisition personnel will use the best-value technique instead.

Don’t be taken in by the heated rhetoric and contrived concerns. LP/TA is not always the right source selection technique, but it often is, particularly during a time of austerity, when it simply is not in the government's interest to pay a best-value premium. Acquisition personnel represented by the American Federation of Government Employees believe that the LP/TA technique provides the necessary level of performance at a lower cost to the government.

The key to successful use of LP/TA is for contracting officers to specify the critical acceptability criteria, which can often be easily accomplished with military equipment and services. Best value may be the appropriate technique when DOD doesn’t know precisely what it is seeking to purchase, or when the work is inherently difficult to describe.

There is a consensus in the so-called “acquisition reform” debate that the Pentagon needs to issue better and more detailed solicitations, which is another argument for preserving the LP/TA technique because it requires discipline and knowledge to write quality specifications and/or statements of work. In contrast, “best value” is often used as a crutch by agencies to allow contractors to tell DOD what to buy.

The Defense Department has not abused its authority in using the LP/TA technique. Given the federal government’s budgetary challenges, Congress should be encouraging the Pentagon to use LP/TA to the maximum extent practical. Contracting officers know LP/TA stands for low-price, technically acceptable, but Americans and their elected officials, in particular, should understand that the acronym means “low-profits/taxpayer-approved.”

J. David Cox Sr. is national president of the American Federation of Government Employees, which represents 670,000 federal and D.C. government employees

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