Does LPTA Really Cost More?
“It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.” – John Ruskin, 1819-1900
In an effort to maintain a high degree of fiscal responsibility, the Government instituted the Lowest Price, Technically Acceptable (LPTA) source selection process. By design, this approach set out to quickly evaluate and award contracts that fulfill requirements at lower costs. Government contracting historically applied this process when purchasing commodities where delivery risk was low and quality was not paramount, which remains appropriate today. (Further guidance promoting the proper use of LPTA is available in the Appropriate Use of LPTA Source Selection Process and Contract Type memo.)
Faced with tightening budgets and dramatic resource constraints and driven in part by the debt ceiling and sequestration, the Government has expanded its use of LPTA to more complex procurements such as services and technology solutions. This broad application of LPTA poses risks that threaten the ability to execute the Government’s mission critical programs. It must be taken into account when determining acquisition strategy and evaluating vendor solutions. These risks include:
- Cost overruns due to delivery challenges, requiring increased contracting oversight
- Misalignment between client quality expectations and the contractor’s delivery
- High project personnel turnover
- Limited access to experienced personnel equipped to address today’s dynamic environment
- Inferior solutions that lack innovation for the Government’s leading challenges
- Potential for future contracts to address insufficient delivery of services or products
While LPTA drives down costs on the surface, it may ultimately prove the more costly approach for complex consulting services and technical solutions. Simply stated, “The common law of business balance prohibits paying a little and getting a lot – it can’t be done.”
To both save money and drive long-term success, the Government should issue solicitations that encourage competition based on solution design and innovation rather than emphasize low cost. This provides lasting solutions that effectively address the Government’s leading challenges, while serving the American people.
Going even further, the Government should engage industry early to identify how it would be best to encourage innovation for particularly challenging requirements. Competition and creativity will increase, and the Government will get the best value.