The ‘P’ in Procurement Isn’t Just for Price, It’s for People Too

Is the federal government moving away from lowest price, technically acceptable procurements? Contractors that are in the people business can only hope so.

When I say “people” business, I mean providing the government with people who exceed expectations in delivering operations, technology and facilities management services. In LPTA procurements, competitions in which the government selects the lowest-priced proposal that meets a minimum set of technical requirements, contractors are not rewarded, or even encouraged, for exceeding these minimum standards. This approach is not compatible with a corporate philosophy that stresses excellence in service delivery by people who are best qualified to do the job.

On March 4, 2015, Frank Kendall, undersecretary of Defense for acquisition, technology, and logistics, issued a memorandum detailing the role that LPTA procurements should play in the Defense Department’s acquisition process. According to the Kendall memorandum, use of 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.”

The Kendall memorandum states that LPTA has “a clear but limited place” in source selection. The memorandum warns that if LPTA is not used appropriately, DOD “can miss an opportunity to secure an innovative, cost-effective solution to meet warfighter needs and to help maintain our technical advantage.” 

Yet we continue to see startling examples of LPTA being used in highly questionable circumstances. For example, we recently saw two LPTA procurements being solicited by a major military hospital in the Washington metro area for emergency room and oncology registered nurses. What message does this send to our warfighters and their families who are going to the emergency room or who need cancer treatment? Would the acquisition specialist who wrote this procurement or the contracting Officer who approved it want to be treated by lowest price, technically acceptable medical personnel? In this situation the risk of unsuccessful performance is certainly not minimal.

We have also seen another Defense agency using LPTA to procure cybersecurity experts. These are professionals who must have the highest-level clearances for work that is mission-critical for the security of some of our nation’s most sensitive assets. It is another situation in which the LPTA approach clearly does not make sense.

The reality of LPTA procurements is that contractors are spending a lot of time and money to deliver high-quality technical proposals that may never be read. Here is how the process works in the real world of government acquisition: Once all of the proposals are in, the government contracting officer opens the bids and looks at the price proposal only. He or she then puts the price proposals in order from lowest to highest price. The technical proposal of the lowest bidder is then opened and compared against a checklist of the solicitation’s technical requirements. If that lowest price proposal meets all of the requirements and it is considered technically acceptable, that contractor can be awarded the contract. The contracting officer does not even have to look at the other technical proposals.

Of course, this approach may be considered more efficient from the government’s standpoint. No need to put together full selection boards. Not as many meetings have to be held. But what about the contractors who make a good faith effort to deliver a high-quality technical proposal? 

The LPTA method may work when the government is buying pens, toilet paper, or office supplies, but not when it comes to buying people and their skills. As Kendall affirmed in his memorandum, the LPTA approach should be used only when technical requirements are well-defined. As is the case with many professional services procurements, requirements are very rarely well-defined. 

When the government is using LPTA, any proposal that exceeds the minimum is not rewarded. That makes it hard to motivate people who are committed to developing or delivering an excellent product or service. Moreover, if your company’s core value is people exceeding expectations, how do you convince employees that you care about them and their families when you are willing to gouge their salaries? 

For companies in the people business, LPTA creates a death spiral. If your company is known for devaluing salaries, you cannot attract qualified people. You cannot motivate the people you do attract, because there is no incentive for them to perform at an exceptional level. Since there are no government rewards for exceeding expectations, employees cannot be rewarded. Ultimately, you cannot retain them.

If agencies actually implemented and followed the criteria in the Kendall memorandum, there is some potential for LPTA. The challenge is giving well-defined requirements and balancing the risk of unsuccessful performance. However the way the LPTA “game” is currently played, someone always has the potential to underbid. In many cases, this underbidding is unrealistic. Because of this, the government needs to do a better job of determining fair market value. Unrealistically low prices should be declared nonresponsive and thrown out of the competitive range. Otherwise, LPTA procurements could be putting the government, warfighters, and the public at risk.

In the long run, the government needs to do the necessary upfront work when acquisition staffers are working with the program office to determine contract requirements. This is the only way the government can clearly define technical requirements and, more importantly, delineate the standard of proof that bidders must show in order to be determined technically responsive. 

The bottom line is that businesses these days have limited resources. These resources may be even more limited in small and medium-sized businesses. They cannot support the overhead cost to develop competitive proposals if they are expected to operate in a price shootout environment with little or no return. LPTA has its place in the federal government procurement cycle, let’s use it when it makes sense and not as a blanket procurement method for trying to reduce costs. 

Staci L. Redmon is president and CEO of Strategy and Management Services Inc., a provider of operations, management and technology solutions in the public and private sector.

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