Defense Primer: Lowest Price Technically Acceptable Contracts

Defense Primer: Lowest Price Technically Acceptable Contracts

Updated March 30, 2023
Defense Primer: Lowest Price Technically Acceptable Contracts
Background
Cost Benefits
When procuring goods or services, the Department of
Under LPTA, all factors other than price are evaluated on
Defense (DOD) generally seeks to obtain the best value for
an acceptable or unacceptable basis without consideration
the government by encouraging full and open competition,
given to higher levels of quality. Observers note that, in
as required by the 1984 Competition in Contracting Act
circumstances where there is no appreciable benefit to DOD
(P.L. 98-369, also known as CICA). Full and open
for exceeding its stated minimum technical requirements,
competition occurs when all eligible prospective contractors
the use of LPTA can potentially result in savings.
are permitted to submit bids or proposals in response to a
Accelerated Time Frames
proposed contract action.
In certain circumstances, LPTA may offer a more
streamlined and simplified approach to procuring certain
Best value, when used in the context of government
goods and services. Firms bidding for a contract know the
procurement, refers to the expected outcome of an
specific thresholds and can sometimes submit proposals
acquisition that, in the government’s estimation,
more quickly. Award decisions require little subjective
provides the greatest overall benefit in response to
analysis, potentially accelerating decision-making.
the requirement (Federal Acquisition Regulation
Fewer Bid Protests
2.101).
Contracts awarded on the basis of lowest price are
considered easier to defend against bid protests. In 2015,
then Under Secretary of Defense for Acquisition,
Getting the Best Value for DOD
Technology, and Logistics Frank Kendall acknowledged
CICA generally mandates that, whenever practical, DOD
this benefit, stating that “objective source-selection criteria
must obtain full and open competition through the use of
are harder to contest successfully.” However, he cautioned
competitive contracting procedures. Part 15.101 of the
that source-selection criteria and acquisition strategies
Federal Acquisition Regulation (FAR) establishes two
should not be designed around limiting the likelihood of bid
primary types of competitive source selection procedures
protests.
intended to obtain the best overall value for DOD: (1) the
When is LPTA Appropriate?
tradeoff process and (2) the lowest price technically
acceptable (LPTA) process. The tradeoff process is
LPTA is considered best suited for situations in which
generally used when cost is only one factor to be considered
 contract requirements are well defined, simple, or reoccurring;
in awarding a contract. For example, DOD may award
 there is a low risk for poor performance;
contracts based on non-cost factors such as quality and
 there is little development work to be completed; and
performance; a firm’s technical or managerial expertise; or
 there is no appreciable value to DOD for performance
past performance. Each of these criteria may be evaluated
exceeding the technical requirements.
on a sliding or pass/fail basis. The use of LPTA is
appropriate when price is the determining factor in
As such, LPTA is more likely to be effective when contract
awarding a contract. Under LPTA, for all proposals deemed
requirements are clearly and comprehensively spelled out.
to be technically acceptable and therefore meeting DOD’s
Recent changes to statute and regulation have set forth
specified minimum performance requirements, price is the
specific requirements for the use of LPTA, as well as
determining factor in awarding a contract, with no
circumstances where DOD should generally avoid the use
consideration given to any other factors. Past performance
of LPTA. Section 813 of the FY2017 National Defense
does not need to be an evaluation factor when it is not
Authorization Act (NDAA) (as amended; see 10 U.S.C. Ch.
relevant for the particular acquisition.
223 note preceding) mandates that DOD can only use
LPTA if the following conditions are met:
In recent years, DOD has faced criticism for using LPTA
 minimum contract requirements in terms of performance
instead of a tradeoff process in certain acquisitions.
objectives, measures, and standards are clearly identified;
Congress has expressed concern regarding the perceived
 there is little or no value in exceeding the minimum technical
inappropriate use of LPTA and has passed legislation
or performance requirements set forth in the proposal request;
limiting DOD’s use of LPTA.
 there is little or no subjective evaluation as to the desirability
of one proposal versus another;
Benefits to Using LPTA
 there is a high degree of confidence that a review of technical
A number of analysts have identified specific benefits that
proposals other than the lowest bidder would not result in the
LPTA may provide DOD, including potential cost benefits,
identification of factors that could provide value or benefit to
accelerated acquisition time frames, and fewer bid protests.
DOD;
 little or no additional innovation or future technological
advantage will be achieved by using a different source
selection process;
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Defense Primer: Lowest Price Technically Acceptable Contracts
 any goods being obtained are generally expendable in nature,
Recent Congressional Activity
are nontechnical, or have a short life expectancy or shelf life;
Congress has also expressed concern regarding the misuse
 a justification is included for the use of an LPTA evaluation
of LPTA for source selection. As noted in the FY2016
methodology in the contract file; and
NDAA Conference Report (H.Rept. 114-270), Congress
 DOD has determined that the lowest price reflects full life-
has been “concerned that … bias towards reducing prices
cycle costs, including operations and support.
paid by [DOD] to the exclusion of other factors could result
DOD is also required to avoid, to the maximum extent
in DOD buying low cost products that have the potential to
practical, the use of LPTA for procurements predominantly
negatively impact the safety of U.S. military personnel.”
intended to acquire knowledge-based professional services
Recent Legislation
(such as cybersecurity services); personal protective
FY2017 NDAA (P.L. 114-328)
equipment; or knowledge-based training or logistics
Section 813: Required DOD to avoid using LPTA when
services in support of contingency operations or other
doing so would deny the benefits of cost and technical
operations outside of the United States. Other specific
tradeoffs in the source selection process and when acquiring
prohibitions on the use of LPTA have been enacted in
information technology services, personal protective
subsequent NDAAs, such as 10 U.S.C. §4232, which
equipment, and knowledge-based services.
establishes a prohibition on the use of LPTA for the
Section 814: Prohibited DOD from using LPTA when
engineering and manufacturing development of a major
procuring personal protective equipment, where the level of
defense acquisition program.
quality or failure of the item could result in combat
Case Study: Air Force Use of LPTA
casualties.
Section 892: Prohibited DOD from using LPTA for
In 2017, the Government Accountability Office (GAO)
acquisition of audit services.
reviewed a $21.5 mil ion Air Force contract for
FY2018 NDAA (P.L. 115-91)
centralized mail sorting services in Germany. The Air
Force used LPTA, as the requirements for the service
Section 822: Specified that LPTA may only be used when
were well defined and noncomplex. The risk and
there is no, or minimal prospect for future technological
consequences of poor performance was low, and there
advantage or for items that are expendable, nontechnical, or
was no appreciable value for performance exceeding the
expected to have short shelf lives.
minimum stated requirements.
Section 832: Prohibited the use of LPTA for the
engineering and manufacturing development of Major
DOD Use of LPTA
Defense Acquisition Programs. The Senate Armed Services
Committee report noted that, while DOD did not classify
In 2010, DOD introduced its Better Buying Power (BBP)
the source selection process used to acquire the Northrop
initiative, which was aimed at cutting acquisition costs by
Grumman B-21 Raider as an LPTA process, the acquisition
$100 billion over a five-year period. Under this policy,
procedure used resembled an LPTA process, not a trade-off
LPTA was viewed as a source selection procedure that
process. The committee expressed concerns in part over the
might help DOD reduce expenditures. In 2014, GAO found
high degree of expected development work.
that LPTA was highly attractive to DOD contracting and
Additional Provisions: Prohibited the use of LPTA for
program officials due in part to declining budgets and
selected software development programs (Section 874),
initiatives such as BBP. According to GAO, from FY2009
aviation critical safety items Section 882), and audit
to FY2013, DOD’s use of LPTA for new, competitively
services (Section 1002).
awarded contracts grew from 26% to 36%. Similarly, a
FY2019 NDAA (P.L. 115-232)
Bloomberg analysis found that there was an appreciable
Section 880: Prohibited government agencies from using
increase in DOD’s use of LPTA between 2008 and 2017.
LPTA when doing so would deny the benefits of cost and
Observers have drawn attention to the perceived correlation
technical tradeoffs in the source selection process.
between increased use of LTPA and budget constraints.
Specifically, use of LPTA was prohibited when acquiring
Critics of DOD’s use of LPTA argue that by not providing
personal protective equipment and certain knowledge based
industry with a business incentive to offer better
services (e.g., cybersecurity).
performance, there is no motivation for industry to develop
FY2020 NDAA (P.L. 116-92)
new, improved, or innovative products and services in
Section 806: Required revision to the Federal Procurement
circumstances where DOD could benefit from better
Data System (FPDS, or any successor system) to facilitate
contractor performance. The use of LPTA conditions the
the collection of complete, timely, and reliable data on the
government market to offer potentially less desirable goods
source selection process, to include tracking the usage of
and services because the incentive structure encourages
source selection mechanisms.
firms to reduce their prices as long as their product remains
above the threshold of technical acceptability. Further,
critics argue that LPTA contracts are not always the most
Heidi M. Peters, Analyst in U.S. Defense Acquisition
effective and efficient approach to ensuring quality and
Policy
performance in the long term; these analysts argue that the
Alexandra G. Neenan, Analyst in U.S. Defense
use of LPTA may sacrifice long-term value for short-term
Infrastructure Policy
savings.
IF10968

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Defense Primer: Lowest Price Technically Acceptable Contracts

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https://crsreports.congress.gov | IF10968 · VERSION 10 · UPDATED