December 4, 2018

New Proposed Regulations Limit the Use of LPTA

Holland & Knight Government Contracts Blog
Eric S. Crusius

The overuse of the Lowest Price Technically Acceptable (LPTA) source selection process (see FAR 15.101-2(a)) has drawn criticism from both industry and government over the last few years. While LPTA offers a streamlined source selection process, it handcuffs the government and obligates it to select the lowest-priced vendor even if a much better solution is available for a nominal additional cost. LPTA is most properly used when the agency can clearly define the requirement, the risk of nonperformance is minimal and there is no value to the government in paying a higher price for better-than-acceptable performance. When using LPTA, agencies can opt to exclude past performance from the evaluation factors. FAR 15.101-2(b)(1).

While LPTA originally was hailed as a means to streamline the evaluation process and achieve lower prices for the government, LPTA procurements have led to increased claims by contractors, performance problems, reduced incentives for contractor innovation, and lower quality products and services. Responding to these issues, in the 2017 National Defense Authorization Act (NDAA), Congress sought to place controls on the Department of Defense's (DoD) use of LPTA source selection procedures. At the highest level, Congress instructed DoD to avoid using the LPTA process in circumstances that would deny DoD the benefits of cost and technical tradeoffs in the source selection process. More specifically, Congress imposed eight conditions on DoD's use of LPTA source selection. Congress further instructed that its use should be avoided to the maximum extent practical when buying: (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.

In the 2018 NDAA, Congress took the restrictions on LPTA a step further. As we noted in a previous blog, the 2018 NDAA provided that LPTA can only be used when: (1) DoD would realize minimal innovation if LPTA was not used; and (2) when goods are purchased, "the goods are predominantly expendable in nature, nontechnical, or have a short life expectancy or short shelf life." See 2018 NDAA Sec. 822. In addition, Sec. 832 of the 2018 NDAA specifically prohibited the use of LPTA in engineering and manufacturing contracts for major defense acquisition programs. Major defense acquisition programs are either designated as such by the Secretary of Defense or are by virtue of dollars spent: $300 million in research and development or evaluation, or $1.8 billion in total expenditures.

All of this followed DoD's Source Selection Procedures, released in 2016, which provided that LPTA is not appropriate when:

  • the agency will need to judge the desirability of one proposal versus another;
  • there are not well-defined standards of performance or quality; or
  • the source selection authority desires to conduct a tradeoff analysis among price and non-price factors.

Today, DoD issued proposed regulations implementing the 2017 and 2018 NDAA provisions. These regulations effectively mirror the provisions in the two annual authorization statutes. Newly-proposed DFARS 215.101–2–70 "limitations and prohibitions" provides that LPTA can be used only when:

  • minimum requirements can be described and measured clearly and comprehensively;
  • there is no (or minimal) value for proposals that exceed the technical minimum;
  • there is little (or minimal) subjective judgment "by the source selection authority as to the desirability of one offeror's proposal versus a competing proposal;"
  • there is little chance that an offeror can provide additional "characteristics that could provide value or benefit;"
  • there is minimal innovation realized from utilizing a different source selection method;
  • goods are expendable in nature, are not technical, or will have a short shelf life;
  • full lifecycle costs are considered (and documented) when utilizing LPTA; and
  • the contract file is documented creating a justification for utilizing LPTA.

Additionally, LPTA should be avoided "to the maximum extent practicable" when the government procures:

  • "information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, or other knowledge-based professional services;"
  • personal protective equipment; or
  • knowledge-based or logistics services outside the United States.

Finally, LPTA will be prohibited in three separate scenarios: (i) for personal protective equipment or aviation critical safety items where a lower quality item (or one that fails) can risk the warfighter; (ii) for engineering or manufacturing development for major defense acquisition programs; or (iii) auditing services.

Taking all of the above into consideration, LPTA would be reserved to commodity-type contracts. Further, it will be difficult to picture the viability of LPTA in service contracts based on the above restrictions.

Comments to the proposed rule are due on Feb. 4, 2019.

Related Insights