Lowest price becoming primary factor in IT, services acquisitions

Tuesday - 11/19/2013, 3:50am EST

Jason Miller reports.

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Vendors say a new trend in how agencies buy technologies and services is sacrificing the long terms benefits for short term savings.

Agencies are increasingly using the concept of lowest-price, technically acceptable (LPTA) to buy complex products and services.

The concept of using lowest-price, technically acceptable to buy products and services isn't new. It's right there in Federal Acquisition Regulations under Part 15.1.

But increasingly, vendors say agencies are using LPTA the wrong way.

"If you went out amongst the hundreds of companies that we represent and asked them what their number one concern about how the government is buying today, they'd say it's the misapplication of LPTA acquisitions," said Stan Soloway, a former Defense Department acquisition official and now president of the Professional Services Council, an industry association. "That's not to say you don't ever use it. Clearly in the commodity environment where most of the different options are the same, price becomes the principle determinant so it makes a lot of sense. But we've seen it spread much broader than that to the point where we've seen contracts for audit preparation, which is for complex financial systems work to help agencies get ready for a federal audit — everyone knows our federal financial systems are not very good and this is complicated stuff- coming out lowest price, technically acceptable. And by the way, in some cases no accounting experience required. We see it across the board in every kind of category."

Agencies are increasingly using LPTA to buy technology and professional services that aren't considered commodities. And that new trend is causing vendors to question whether the pendulum to use LPTA has swung too far and the government will see the consequences for years to come.

As part of our special report, A New Era in Technology, Federal News Radio explores why agencies are moving to LPTA and how it's impacting the way they buy technology and services.

Five-year growth

And it's not just anecdotal evidence from companies upset about tighter budgets and a more stringent focus on cost.

Govini, a government market research firm, found in exclusive research for Federal News Radio the number of solicitations and awards calling for LPTA have skyrocketed since 2009.

Govini examined solicitations and awards that specifically call out lowest price, technically acceptable. In 2009, for instance, agencies issued 3,165 solicitations and made 1,014 awards.

By 2013, agencies' use of LPTA shot up. Agencies issued 4,230 solicitations and made 2,166 awards that call for the use of lowest-price, technically acceptable. And not all of fiscal 2013 data is in, so both those figures are expected to rise.

Centurion Research Solutions and Market Connections also analyzed federal procurement stats and found agencies were applying LPTA to IT and telecommunications services at a higher rate per opportunity than any other product or service.

"IT and telecommunications had a multitude of opportunities, so the ratio was high at 6:1 because the value was lower and spread across all products and services," said Fritzi Serafin, vice president for research services for Centurion Research, during a recent briefing on the research.

Centurion and Market Connections also found DoD is the biggest user of LPTA with the Transportation Command, the Navy and the Army leading the way.

Vendors say part of the reason for this push to use LPTA is the budget pressures under sequestration. They also say agencies believe using lowest price technically acceptable is easier to defend in the case of a bid protest.

PV Puvvada, group vice president for civilian agencies at Unisys, said it's not just DoD using LPTA, but there are plenty of examples of civilian agencies putting out solicitations focused solely on price.

"Some of the contracting officers are taking the easy way out of the competitions and just lowering the bar for the requirements so many people can meet the technical requirements and then kind of decide on the price alone. That has been the trend," Puvvada said. "The pendulum has swung too far. Over time, you'll see the pendulum swing the other way because over time they will realize they are not getting what they really intended to get through this."

He added contracting officers will realize LPTA is having a negative impact on their mission, and that will force them to rethink the use of this price centric approach for complex services.

LPTA by another name

Alison Kidd, the executive vice president of sales for Foreground Security, said agencies are using LPTA for cyber services, which is by no means a commodity.