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Alert

Limits on Use of Lowest-Price, Technically Acceptable Procurements at DoD

Department of Defense issues a final rule limiting the ability of defense agencies to use lowest-price, technically acceptable procurement procedures.

By Richard B. Oliver, Aaron S. Ralph, Alexander B. Ginsberg

Alert

By Richard B. Oliver, Aaron S. Ralph, Alexander B. Ginsberg

Takeaways

The new rule takes effect on October 1, 2019 and permits defense agencies to use lowest-price, technically acceptable (LPTA) procedures—rather than best value trade-off procedures—only when eight specific criteria are satisfied; the rule also imposes additional prohibitions against the use of LPTA procedures.
Offerors objecting to an agency’s proposed use of an LPTA acquisition will, in some instances, now be able to cite specific regulations that support their position and possibly serve as the basis for a pre-award bid protest.
The final rule affects only defense procurements. A separate final rule is being crafted to implement Section 880 of the National Defense Authorization Act (NDAA) for FY 2019, which would apply to civilian agencies many of the limitations that the new rule imposes on defense agencies.

09.30.19

LPTA procurements require selection officials to choose the lowest-priced proposal that meets the minimum technical specifications, ignoring the additional benefits offered by other proposals.[1] This is true even if another proposal is only one cent more expensive,[2] or proposes innovations.[3] Thus, some agencies have issued guidance advising contracting officials of the limitations of their use of LPTAs, cautioning that “[t]he LPTA process does not permit tradeoffs between price and non-price factors and an offeror’s failure to meet a mandatory technical requirement will render its proposal ineligible for award.”[4] This low price requirement can cause the Government to buy products or services that  it does not want, forgo buying products or services of greater value that it does want, and ultimately reduce customer satisfaction.[5] Procurements that involve best value trade-offs, by contrast, provide agencies flexibility in their contracting decisions and  permit agencies to make award to a technically superior proposal that may not have been the lowest-priced proposal.

This new final rule amends the Defense Federal Acquisition Regulation Supplement (DFARS) to include stringent limitations on the use of LPTA procurements by defense agencies. The rule implements sections 813, 814, and 892 of the FY 2017 NDAA, and sections 822, 832, 882, and 1002 of the FY 2018 NDAA.[6]  Section 813 of the FY 2017 NDAA required that DoD allow the use of LPTA procedures only when the following six criteria are satisfied:

  1. DoD is able to comprehensively and clearly describe the minimum requirements expressed in terms of performance objectives, measures, and standards that will be used to determine acceptability of offers;
  2. DoD would realize no, or minimal, value from a contract proposal exceeding the minimum technical or performance requirements set forth in the request for proposal;
  3. the proposed technical approaches will require no, or minimal, subjective judgment by the source selection authority (SSA) as to the desirability of one offeror's proposal versus a competing proposal;
  4. the source selection authority has a high degree of confidence that a review of technical proposals of offerors other than the lowest bidder would not result in the identification of factors that could provide value or benefit to the DoD;
  5. the contracting officer has included a justification for the use LPTA evaluation methodology in the contract file; and
  6. the DoD has determined that the lowest price reflects full lifecycle costs, including for operations and support.

Section 832 of the FY 2018 NDDA subsequently added the following two additional criteria to this list, so that LPTA procedures may be used only where eight criteria are satisfied:

  1. the DoD would realize no, or minimal, additional innovation or future technological advantage by using a different methodology; and
  2. with respect to a contract for procurement of goods, the goods procured are predominantly expendable in nature, nontechnical, or have a short life expectancy or short shelf life.

In addition to limiting LPTA procedures to those situations where the eight criteria above are met, the FY 2017 and FY 2018 NDAAs explicitly prohibited the use of LPTA for certain categories of acquisitions. Section 813(c) of the FY 2017 NDAA provides that “to the maximum extent practicable,” the use of LPTA shall be avoided when purchasing “(1) information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, or other knowledge-based professional services; (2) personal protective equipment; or (3) knowledge-based training or logistics services in contingency operations or other operations outside the United States, including in Afghanistan or Iraq.” Similarly, Section 832 of the FY 2018 NDAA prohibits the use of LPTA in engineering and manufacturing contracts for major defense acquisition programs.

The FY 2019 NDAA, Pub.L. 115-232, which the President signed into law on August 13, 2018, also includes limitations on the use of LPTA procedures. Section 880 applies to civilian agencies many of the foregoing limitations. The new rule does not address the requirements in section 880, as that statute is being implemented via FAR case 2018-016, Lowest Price Technically Acceptable Source Selection Process.

Two recent Government Accountability Office Reports, one from November 2018 (GAO-19-54) and one from September 2019 (GAO-19-691) found that, in FY 2017 and FY 2018, DoD used the LPTA process for about 26 percent and 25 percent of contracts and orders exceeding $5 million, respectively. Congress, via the FY 2017, FY 2018 and FY 2019 NDAAs, has sought to reduce the prevalence of this procurement type. While the simplicity of LPTA procurements is attractive to procurement officials, Congress appears to have concluded that efficiency on the front end of a procurement often does not justify the results. In sum, contractors can expect that agencies will reduce their use of LPTA acquisitions.

[1]  FAR 15.101-2. 

[2]  See id.

[3]  See Triad Logistics Services Corp.,B-407842.2, 2013 CPD ¶ 106, at 3 (Comp. Gen. Apr. 22, 2013).

[4]  Department of State, 14-FAH-2, H-367.1 (Oct. 30, 2015) (emphasis added); see also the DoD’s 2016 Source Selection Procedures.  

[5]  See Timothy Bunting, Lost and Found: In Search of a Uniform Approach for Selecting Best Value, 44 Pub. Cont. L.J. 1 at 28 (2014). (“A certain degree of flexibility is needed in order to make rational decisions and select the best option for taxpayers. LPTA prevents the agency from paying more for what it considers to be better value.”)

[6] The new rule accomplishes this by amending several DFARS provisions and adding a number  of new ones. The rule amends DFARS section 208.405, subsection 213.106–1, section 216.505, and section 237.270. The rule also adds the following provisions:  section 212.203; section 215.101–2–70; subpart 217.78, and subsection 234.005-2. Finally, the rule adds the section heading 215.101-2.

Tags
Government Contracts & Disputes, Cyber Compliance in Government Contracts
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