DoD Puts Further Limits on Use of LPTA
By Emily Yoshiwara on October 28, 2019 | Posted in
On October 1, 2019, the Department of Defense (DoD) issued a final rule (DFARS 215.101-2-70) that implemented limitations on its ability to use the Lowest Price Technically Acceptable (LPTA) method of procurement.
In a LPTA procurement, a contact is awarded to the offeror with the lowest price who submitted a technically acceptable proposal. There is no trade off involved in the evaluation, low price is favored over technical superiority. Although this procurement method was intended for simple and uncomplicated procurements, government contractors have long complained of its use in complex procurements where technical differences are not only relevant but desirable or even critical to the ultimate success of the mission. In recent years, however, LPTA has been used frequently—in 2017, 26% of all contracts and orders competitively awarded by the Army, Navy, Airforce, and DLA valued at $5 million and above used the LPTA process.
The restrictions on LPTA have been imminent since 2018, when Congress passed the National Defense Authorization Act. The new rule officially implements Congress’s intention to limit the DoD’s use of LPTA. Under the new rule, LPTA can only be used when specific requirements are met, including:
- A contract’s minimum requirements can be “clearly and comprehensively” described and expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
- No, or minimal value is realized from a proposal that exceeds the minimum technical or performance requirements;
- The desirability of the technical approach proposed by the offeror requires little or no subjective judgment by the source selection authority;
- The source selection authority has a high degree of confidence that reviewing technical proposals of offerors would not result in the identification of characteristics that could provide value or benefit;
- No, or minimal, additional innovation or future technological advantage is realized by using a different procurement method;
- Goods to be procured are predominantly expendable in nature, nontechnical, or have a short shelf life.
Additionally, the contracting officer must document in the contract file the circumstances justifying the use of LPTA. The determination to use LPTA must be based on the life cycle costs of the product, not just the up-front costs. Finally, the rule issues an outright prohibition of the use of LPTA for engineering and development for future major defense systems, procurements for personal protective equipment where failure of the equipment could result in combat casualties, and auditing services.
The final rule also lists a variety of types of procurements where the use of LPTA is significantly limited—although not completely banned. The rule mandates that LPTA should be avoided “to the maximum extent possible” in the acquisition of personal protective equipment; knowledge-based training or logistics services in contingency operations outside the U.S.; and information technology services, cybersecurity services, systems engineering and technical assistance services or other knowledge-based professional services.
The DoD was hesitant to put more restrictions on the use of LPTA because it would not take into account the individual circumstances of particular military needs. It also rejected calls for restrictions on the use of LPTA for procurements for health care services and telecommunications devices and .
It remains to be seen how DoD contracting officials will implement the final rule. According to a November 2018 report, DoD contracting officers said they “generally considered” most of the criteria now included in the final rule when determining whether to use LPTA as a source selection method. However, this report showed that contracting officials expressed confusion about how to apply some of the criteria included in the finalized rule: whether goods are predominately expendable in nature or have a short life expectancy or short shelf life and whether the lowest price will reflect full life-cycle costs for the goods or services.
It is clear that the final rule significantly limits the procurements where LPTA can be used. However, there are still a number of procurements where the DoD can use this method, or at least make an attempt to do so. As the final rule goes into effect, contractors should be aware of these new limitations on LPTA and be on the lookout for any solicitations that improperly uses this contracting method, including evaluating whether it is appropriate to file a protest, before bids are due, challenging what may be an improper source selection method for a given procurement.