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National Defense > Blog > Posts > Executive Slams ‘Lowest Price, Technically Acceptable’ Acquisition Regimes
Executive Slams ‘Lowest Price, Technically Acceptable’ Acquisition Regimes
By Stew Magnuson
 


The president of a major satellite services provider said the U.S. military’s “lowest price, technically acceptable” procurement strategy is stifling innovation and ultimately shortchanging war fighters.
 
Ed Spitler, president of Astrium Services Government Inc., a part of the Airbus Group, said Jan. 16 at a Washington Space Business Roundtable luncheon that the new regime in the military acquisition community is to go with the lowest possible bid on services as opposed to more traditional evaluations where a variety of factors are taken into account.
 
“Satcom isn’t a commodity. Nor is it one size fits all,” he said, although the military sees it that way. It is exchanging new applications and value added services for lower prices, he said. Sequestration and the budget crunch are forcing the Defense Department into a regime where “price seems to be the most important thing — not necessarily capability.”  
 
“In my opinion, I think the war fighter is getting a raw deal,” he added.
 
In what is a reversal from the norm — and some might say ironic — Spitler maintained that the large contractors are now being passed over for small businesses. Big organizations with large groups of experts and  deep assets are losing out. The lowest price bid gets its proposal evaluated to see if it meets the technical requirements. If it does, none of the others are considered or even read, Spitler maintained.
 
“You may have written the best proposal of your life … but it will never be read by the government because of that LPTA requirement,” he said. “It’s a shame because there is no room for innovation when you do that.”
 
While he acknowledged the need for the Defense Department to support small businesses, he has seen some large contracts go to companies with only two or three employees. Some of these contracts would be challenging for a large firm such as his to fulfill, he said.

He has asked procurement officials how they can give contracts to such small, inexperienced firms. Their attitude is: “If they fail or default in year one, we just recompete it,” he said.
 
There are many competitors who are now seeking to provide satellite bandwidth to the military. It would not be unusual for a procurement official to receive 40 or more responses to a request for proposals. Now, all the official has to do is look at one of them. Spitler said he believed that the other 39 or so responses aren’t even considered.
 
The official no longer has to look at such factors as past performance. “No matter how hard we are working out there, sometimes it is not being recognized by the government,” he added.
 
The U.S. military needs commercial satellite providers to fill gaps in its bandwidth requirements because the fleets of military spacecraft can’t provide all the capacity that is needed. The industry has long complained that the Defense Information Systems Agency leases capacity at one-year increments. The comsat providers are looking for more stability so they can plan ahead. Astrium, for example, has a 20-year contract with the United Kingdom’s Ministry of Defense to provide needed bandwidth.
 
The U.S. military could achieve the savings it seeks if longer contracts were awarded, Spitler said. That would result in innovation. But that is no longer a factor when bids win by simply being the least expensive, technically acceptable offer, he added.

He pointed to one study by the research firm Market Connections in October that said LPTA contracts may result in standards and performance being lowered, and less than optimal prices for product development.
 
There is also no clear definition for “technically acceptable,” he said. It means different things to different people, he added.
 
Congress has heard the industry’s call for change. The National Defense Authorization Act directs the Defense Department  to move toward multi-year leases and hosted payloads to acquire commercial satellite capacity and services. It requires the department to produce an analysis of financial or other benefits of doing multi-year acquisitions within 90 days of the bill’s passage.

Credit: An Astrium-built communications satellite (photo by Astrium)

Comments

Re: Executive Slams ‘Lowest Price, Technically Acceptable’ Acquisition Regimes

An insightful, timely, relevant, and accurate commentary on the LPTA issue and industry's concerns that it is "stifling innovation and shortchanging the warfighter."

Mr. Spitler's comments are, in fact, supported by an interesting National Defense University (NDU) "Spring 2012 Industry Report" titled "Private Support to Combat Operations Industry."

While the USG's buying power is significant and reasons for utilizing the LPTA concept for contract award currently sounds good, policy makers should remember that "reasons that sound good are not necessarily good sound reasons."

This is particularly true since "technically acceptable" is a vague and ambiguous term - and vague and ambiguous is exactly what the Department of Defense (DoD) should not be purchasing.

If achieving the Capstone Concept for Joint Operations goal of "globally integrated operations" is to become a reality and the United States Armed Forces mission is to "remain globally postured and integrate capabilities fluidly across domains, echelons, geographic boundaries, and organizations," is the objective, than policy makers should reconsider the true value of this effort and encourage industry growth and innovation to ensure "globally integrated operations" is achieved.

Like Mr. Spitler, I am concerned that if "capability" is goal, a LPTA-only approach will not get us there.
Raymond M. Lutz, MEP at 1/17/2014 7:53 AM

Re: Executive Slams ‘Lowest Price, Technically Acceptable’ Acquisition Regimes

AMEN, Lowest Price, doesn't mean lowest cost if quality, customer service, experience, etc. are poor.  Taxpayers save a few bucks up front but pay for it on the back end, when these contracts need to recompeted sooner rather than later.

monica monfette at 1/17/2014 1:25 PM

Re: Executive Slams ‘Lowest Price, Technically Acceptable’ Acquisition Regimes


Agree with Mr. Spitler.  The following text is word for word from a HQ ACC solicitation which adds additional support to Mr. Spitler's discussion.
"The requirement will be evaluated using the Lowest Priced, Technically Acceptable (LPTA) source selection method. LPTA source selection method is a simplified best value source selection strategy that permits award to the lowest priced offeror who meets the minimum requirements as identified in section 4.0 of the PWS."
"Tradeoffs are not permitted and no evaluation credit is given to aspects of an offerors proposal that exceed acceptability standards."
Key words to note are minimum requirements and no credit for exceeding acceptability standards.  A core value of the USAF is Excellence in All We Do.  There is nothing in the LPTA approach that achieves excellence.
Austere budgets have driven the almost exclusive focus on lowest price.  LPTA has been supported by a poor economy where there have been adequate numbers of qualified people available and willing to work with pay and benefit cuts.  This is not sustainable if the economy turns around which it will inevitably do.
Also,most active duty personnel responsible for executing the mission under LPTA will move on before the impact is actually felt or noticed.  Their primary focus is to get whatever they can with whatever money they have.  They will most likely move on to their next assignment before the actual impact of their decisions are felt leaving their replacement with an even greater challenge.
Last point. The warfighter community (those responsible for executing the mission) have abdicated their responsibilities to the acquisition community.  I have had numerous operators tell me they're frustrated because the contracts shop won't let them acquire the services they need without using LPTA.  It is time for the O-6s to stand on a contract officer's desk and remind them who has responsibility for executing the mission and the associated budget.  The CO's job is to support the mission and comply with the FARs, (keep everyone out of jail), not mandate a LPTA approach with no other options. We all know budgets are tight, why not use a lowest price, technically superior approach?
Walt Burns at 1/18/2014 8:54 AM

Re: Executive Slams ‘Lowest Price, Technically Acceptable’ Acquisition Regimes

Much of Mr. Spitler's comments are pure speculation.  How would he know how source selection boards are conducted given that he has never participated as a member of a source selection team? 

The comment that "the other 39 or so responses aren't even considered" is completely untrue.  Every proposal, with the exception of those that are disqualified for being noncompliant, is evaluated.   

There is a significant amount of policy to ensure that every offeror gets a fair evaluation.  This occurs at multiple levels, to include reviews by legal, acquisition policy, and ultimately the source selection authority.  The amount of oversight (especially for non-commodity procurements) cannot be overstated, and it's due to the fact that agencies have to protect themselves from protest.

The idea that the Government can simply ignore proposals because "the first LPTA in the stack wins" implies negligence that simply does not exist.  A quick internet search would turn up multiple SOPs for conducting source selection boards, none of which remotely suggests what Mr. Spitler is advocating.  

Concerning no definition for technically acceptable, that's also incorrect.  All offerors get the same criteria (typically section M of a solicitation) which details how technical, past performance, and pricing evaluations will be conducted.  It also contains definitions for outstanding, good, **acceptable**, marginal, and unacceptable.

This article is nothing more than one person's opinion.   
Rob Dailey at 1/18/2014 12:24 PM

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