We have observed an increase in Government use of Lowest Price Technically Acceptable (LPTA) acquisition strategy. This strategy does not generally favor incumbents (there are exceptions) but often creates opportunities for new competitors. Some questions you should ask yourself: What should you consider before pursuing? What is LPTA compared to Best Value solicitations? What are the “rules” that govern the LPTA process? How does the selection process work? What is a competitive price range? If you are an incumbent, how do you become an exception? What does Unbalanced Pricing mean? We will discuss a few of these questions and others below, however, you must understand that each pursuit is different and not one answer fits all.
Let’s start with the understanding of how LPTA is governed. One item often confused by competitors and sometimes by the Government is that LPTA source selections are governed by the same rules as "Best Value" source selections. They are not. Best Value is a system that looks at factors other than price and scores them. These values are tabulated and the offeror with the best score wins. The LPTA source selection process is where the government determines that an offer is acceptable if it meets or exceeds standards and is the lowest evaluated price. With that said, you don’t have to and should not throw out FAR 15.306--Exchanges With Offerors After Receipt of Proposals, but rather use it for lessons learned and processes. Example, the Government must allow any offeror in the competitive range the same chance to change its proposal if offered to any competitor.
Which begets the question of what is an acceptable range? The Government must establish a competitive range and determine whether the offerors whose proposals are unacceptable are within that competitive range. More detailed information on this can be found under FAR 15.306 (C). However, just because a proposal was deemed unacceptable might not be a basis to exclude a competitor from discussions. Though the government has great leeway, the GSA has determined upon protest that if a competitor’s price was in the competitive range and shortcomings were easily corrected, they should not be excluded from discussions. So, if your company is excluded, it would behoove you to examine your options based upon the “reasonableness” of your exclusion.
Some offerors have been eliminated due to Unbalanced Pricing. Per FAR 15.404-1(g), “Unbalanced pricing exists when, despite an acceptable total evaluated price, the price of one or more contract line items is significantly over or understated as indicated by the application of cost or price analysis techniques.”…. “The greatest risks associated with unbalanced pricing occur when -- (i) Startup work, mobilization, first articles, or first article testing are separate line items; (ii) Base quantities and option quantities are separate line items; or (iii) The evaluated price is the aggregate of estimated quantities to be ordered under separate line items of an indefinite-delivery contract.” (FAR 15.404-1(g)(1)). Contractors may find themselves submitting a proposal where there is a perfectly rational reason to frontload the pricing, such as where there are significant start-up costs that will not be incurred in later years. There may also be legitimate reasons why costs will decrease during the option years, whether through economies of scale or some other method of cost savings. However, contractors should be careful not to submit pricing with a drastic difference between the base and option periods. Federal agencies are required to analyze the risk to the government posed by the unbalanced pricing and have the discretion to eliminate an offeror from competition for an unbalanced submission.
Not only is price at the top of the importance scale, but technical capability is also very important. Here is a look at a Standardized Source Selection Evaluation Rating in the below table that is used to evaluate whether the offeror is technically acceptable or not, along with the level of risks:
Standardized Source Selection Evaluations Ratings
(Combined Technical/Risk Ratings)
So, whether you are new to the LPTA environment or not, the above information only touches on a few burning topics and questions regarding this acquisition strategy. However, there are so many factors and variables involved in submitting a winning bid not only in the LPTA environment but for all types of Government solicitations. I would highly suggest before persuing any offerings you be able to answers these important fundamental questions: Does my company qualify as an offeror? Do I have a fighting chance on winning technically and economically? Who are my competitors? What are my intentions for winning – profit, growth? What are the risks? How will this effort, if awarded, impact my business model? I would also recommend you have a full and complete understanding of the solicitation requirements offered as well as an understanding of all aspects of Government Bid and Proposal processes.
TMST Consultants can help you answer all of these questions as well as aid in the submission of a winning bid. Our company is 100% veteran-owned with real experience and real connections. We are in touch with critical information and key decision-makers coupled with 44 years in a variety of experience in Military and Defense Acquisition, Program Management, Finance Management, Business Development, Contract Management, Live/Constructive/Virtual Technology and Training our consultants focus on one thing – YOUR SUCCESS!
Please visit TMSTconsultants.com to tap into our network of unrivaled expertise and knowledge plus get a full understanding of what we can do for you and your business.