New Study: LPTA Procurements Negatively Impact Government Contracts and Sacrifice Long-Term Value - (Archived)

New study from Market Connections, Inc. and Centurion Research Solutions reveals how LPTA contracts are stifling innovation, driving down prices and sacrificing long-term value for short-term cost savings

Today, more than 200 members of the government contracting community gathered at the Gannett Conference Center in McLean, Va., to gain key insights into the impact of Lowest Price Technically Acceptable (LPTA) procurements on both government and contractors.

A new study from Market Connections, Inc. and Centurion Research Solutions revealed that contractors and government believe LPTA contracts may be awarded to less qualified companies, may sacrifice long-term value for short-term cost savings and could act to lower government contractors’ standards of performance.

top_reasons“Although many contractors believe that LPTA contracts are stifling innovation, driving down prices and at times being used for the wrong types of federal procurements, LPTA contracts are not going away anytime soon,” said Lisa Dezzutti, President and CEO of Market Connections, Inc. “Contractors will continue to face the challenge of having to offer lower-cost solutions and will need to adjust their operational and pursuit strategies accordingly.”

An online survey of 375 government contractors involved with business development or program management activities in their companies, and 360 federal government decision-makers involved in the selection of contractors and vendors, found that:

  • LPTA sacrifices long-term value:  65% of contractors and 43% of government employees believe that LPTA procurements sacrifice long-term value for short-term cost savings.
  • Less qualified contractors win LPTA contracts: Both audiences (71% contractors and 59% 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.
  • LPTA procurements will increase in the next three years: Both audiences believe that LPTA procurements will increase in the next three years (59% contractors vs. 42% government), overwhelmingly driven by federal budget restrictions.
  • Government employees are less familiar with LPTA: Nearly all contractors indicated they are either very familiar (77 percent) or somewhat familiar (19 percent) with LPTA. About two-thirds of government employee respondents are either very familiar (32 percent) or somewhat familiar (33 percent) with LPTA.
  • Contractors equate best value with LPTA procurements: Two-thirds of contractors (63%) are likely to equate an RFP specified as ”Best Value” as an LPTA RFP.

Centurion Research Solutions identified $27.7 billion in actionable LPTA opportunities using its Business Intelligence NOW™ opportunity tracking tool, with an average annual value of $18 million. If indeed best value equates with LPTA, the total value of opportunities expands to $744.5 billion and the average annual value doubles to $38.8 million. Centurion identified Department of Defense as the top user of LPTA procurements, and the Department of Veterans Affairs and Department of Homeland Security as holding the most LPTA opportunities among civilian agencies.

LPTA_infographic_1“If indeed LPTA equates with best value, the scope of impact increases dramatically,” said Fritzi Serafin, Vice President of Research Services at Centurion Research Solutions. “The total dollar value of actionable opportunities increases more than 25-fold with the dollar value range expanding significantly, and the average annual value more than doubling.”

The event also included the following panelists:

  • Deb Alderson – President & CEO, Sotera Defense Solutions
  • Michael Fischetti – Executive Director, National Contract Management Association (NCMA)
  • George Obertubbesing – Vice President, Business Development, Harris IT Services
  • Ray Whitehead – Vice President, Business Development and Strategic Planning, General Dynamics Information Technology

“I am not surprised by the shift towards LPTA contracts and we have seen many government customers not happy about it,” said Alderson during the panel when asked about her overall perceptions of LPTA procurements.

“It [LPTA] is exactly as it is described in the survey and this is the state of our market right now,” said Whitehead.  “The use of LPTA needs to be called into question and given more scrutiny, and the question is, is it good for the taxpayer?  In addition, IT and professional services are mission-critical and do we want the government buying these solutions using LPTA?”

LPTAStay tuned for more coverage from this event.  In the meantime, an overview of the study results is available for download at www.marketconnectionsinc.com/LPTA. The full report will be available for purchase in November.

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5 responses on “New Study: LPTA Procurements Negatively Impact Government Contracts and Sacrifice Long-Term Value

  1. Robin

    I was curious if anyone brought up the Andrews Amendment to House Report 113-102, H.R.1960 – the FY2014 National Defense Authorization Act and the chilling effect on agency decisions? It has both statutory and report language. it was adopted by the House Armed Services Committee this past summer en bloc. The amended bill text can be found on p.430, H.R. 1960. I copied the report language for your response. Thank you.
    Report Language – Andrews Amendment
    FY2014 NDAA – House Report 113-102, H.R. 1960
    TITLE VIII—ACQUISITION POLICY, ACQUISITION MANAGEMENT, AND RELATED MATTERS
    LEGISLATIVE PROVISIONS
    Subtitle B—Amendments to General Contracting Authorities, Procedures, and Limitations
    p. 189 – Section 816—Requirement that Cost or Price to the Federal Government be Given at Least Equal Importance as Technical or Other Criteria in Evaluating Competitive Proposals for Defense Contracts
    This section would amend section 2305(a)(3) of title 10, United States Code, to require that the head of an agency of the Department of Defense, in prescribing the evaluation factors to be included in each solicitation for competitive proposals, assign importance to cost or price at least equal to all evaluation factors other than cost or price when combined. This section would allow the head of an agency to waive the requirement, and it would require the Secretary of Defense to submit to Congress, not later than 180 days after the end of each fiscal year, a report containing a list of each waiver issued during the preceding fiscal year.

  2. John Bird

    LPTA forces the government concerns high probability of success to high risk of quality assurance and therefore low probability of success.
    LPTA drives out well qualified contractors to even make orals, where challenges can be made especially on the cost to value ratios.

    LPTA is the product of poor management and cost avoidance on the part of both contractors and government program personnel. The practice is tantamount to destroying the likelihood of long ermed success and growth management.

  3. Bob Ramos

    My firm was a victim of LPTA. We were the incumbent on a very sensitive army contract. When the contract came up for rebid, we were notified that it would be subject to LPTA. In the end we came in 2nd. A year after award, the army is very dissatisfied with the “winner” and is due to come out a rebid shortly. Major problems include employee turnover, failure to comply with deliverables and other violations. The “winner” did not have prior experience in the area involved. Go figure.

  4. Jerry Latham

    A rather hidden aspect of LPTA is the Government’s hesitation to terminate a contract even when the services provided do not meet all aspects of the contract requirements. Instead of admitting the error by terminating the contract, they continue it and even exercise option periods so that some Contracting Officer can chalk up another LPTA success on their scorecard. It would be interesting to see an unbiased study made using contract performance reports to see how many did not receive at least Satisfactory in scored categories for all performance periods, with an eye to identifying ones where problems were indicated to a significant (left to the reader to define significant) period in the contract’s life and yet the contract was not terminated either for cause or for the convenience of the Government.

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