208 - What is LPTA?

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Transcript

Paul: 0:15

Welcome to the Contracting officer podcast. It's not just for contracting officers. If you work anywhere in the government acquisition world, this podcast is for you. Our topic today is a common source selection process called low price, technically acceptable or LPTA. This episode is brought to you by Skyway Acquisition. If your organization is interested in training from a team of former contracting officers, go to askskyway.com and learn about how Skyway helps both government and industry teams with the acquisition and contract execution process. Okay. Let's get started and learn about LPTA.

Kevin: 0:53

I wrote a chapter in my book about why I like LPTA. It was when I was a contracting officer. Simply put, it's because all things being equal, it's the easiest differentiator. I mean price is the easiest way to to compare things. I told th e s tory of h ow I used LPTA and kind of a modified tw o s t eps s e aled b id approach that involved lowest price, but I was buying a Ford expedition. I m e an i n that case, but not in most cases, but in that case LPTA made sense because I was buying. It's literally a commodity. Th ere a r e 5 0 dealers wi thin T ampa Bay or w ithin an hour drive of my house that can sell this thing. But price is the decider in this case, but only when all things are equal. And rarely are all things equal unless you're literally buying something like a Ford expedition that Ford makes it and then lo ts o f d ealers. So in that case it made sense and I get a lot of static from people about like, oh yeah, but LPTA, y ou said in your book was good. In that scenario. It was

Paul: 1:53

in most things that you buy. There are so many variables that go into the decision making of why you choose what you choose, that getting it down to just price is very difficult. When you're thinking low price, a lot of times you might think of Walmart. I'm not saying anything bad about Walmart, I'm just saying that they own that low price market. If you are looking to buy commodities, things that you can buy in lots of other places, it's very possible that Walmart has the lowest price for for the same things and that's the story of scale and market power that we won't get into here. When the transaction is more complex. When you're buying something more complex, not commodities, you may not end up going to walmart to make your purchase.

Kevin: 2:45

The more complex that things get, sometimes we can get overwhelmed and given that price is the easier thing to decide on. Sometimes we throw up our hands and say,"okay, well let's just go with lowest price"- even though there are lots of variables that go into that price, and again, t hat's. That's why this stuff is hard. It's human nature.

Paul: 3:07

Before we get into human nature, let's stop and say thanks.

Speaker 3: 3:11

Well my human nature is to say is to say thank you to people. Let's say, thanks this week to Darlene leg guard. She's the contracts manager at Raytheon out in Los Angeles and the Los Angeles area. Darlene has been liking and sharing our content, our podcast content on Linkedin, and the best way for people to find our stuff is for people to like and share it, so thanks for doing that Darlene.

Speaker 4: 3:31

Thanks Darlene. Today we're talking about LPTA, lowest price technically acceptable and this is on the best value continuum of buying approaches, source e lection approaches that the government uses at one end is the tradeoff approach, so all the way on one side is we're g oing t o look at every possible element of what we're going to buy and trade everything off a little bit more here, a little bit less t here, including price, and then we're g onna come to a decision on what the best value for us is. On the other end, the far other end of that continuum is low price technically acceptable, where we're go ing t o s nap a l i ne. I f it can do these three things, it's technically acceptable and wh ich e v eryone c an do these three things and has the lowest pr ice i s t h at o ne we're going to select and you know it's not three. I was just making an example.

Kevin: 4:23

Three is always the perfect number and in between those two extremes on the on the best value continuum is a sea of opportunity. You can have certain elements that are LPTA and you can have all parts that are traded off. Only certain parts are traded off. There's lots of opportunity between those two, but those are the two extremes.

Paul: 4:43

You can find LPTA in the FAR at 15101-2a where it says LPTA source selection process is appropriate when best value is expected to result from the selection of the technically acceptable proposal with the lowest evaluated price. So that's pretty easy to understand. There's this best value continuum where you look at everything in the world, but in less complex acquisitions. If you can determine that we really don't need to trade off all these variables because they're all just about the same, so low p rice i s really all we need to look at. Then you can skip all that time and energy that it takes to do all these t radeoffs and get to a best value and just look at price.

Kevin: 5:26

And the next paragraph, which is 15101-2b says, when using the lowest price, technically acceptable process, the following four items apply.

Paul: 5:37

First pass performance can be ignored. If the contracting officer documents a file that in their judgment past performance isn't going to provide any value in the evaluation. You don't have to include it.

Kevin: 5:52

We did an episode 124 about past performance being a bridge to the next contract. So that's a big question, is if, if something is such a commodity that you don't care about past performance, then LPTA applies. That's a big statement.

Paul: 6:07

So then past performances isn't a bridge to anywhere.

Kevin: 6:10

Exactly. It's a bridge to nowhere. Yeah.

Paul: 6:14

So no past performance. Second Tradeoffs are not permitted. This is where, again, you snap the line. Here's my technically acceptable line. You can't say, Oh wow, that's a little bit above the line that that's a little bit more. That's I want, I really want that. Nope. Too late, too late, no tradeoffs allowed,

Kevin: 6:34

and the I really want that. That's the dangerous place because a customer. I've seen this happen before. One of our team members, Steve, but he's done these in the past and this is why you stopped doing them, is that the customer says, oh, but I want that, and he's like, it's above the line we can't get that are going to get a protest and then the customer is unhappy, so another slippery slope element of the LPTA

Paul: 6:56

that leads us right to the third piece of this. Proposals are evaluated for acceptibility but not ranked using the non cost/ price factors. It's a pass fail. We need a car that has a top speed of 60 miles an hour. If your car's goes 65 and costs$1 more than a car that goes 60, they're going to select the car that goes 60 and there might be like you're saying, there might be people that say, oh, I'd really like to go 65, but you can't get any credit for it in a low cost. Technically acceptable competition.

Kevin: 7:32

Even if there are other intelligent reasons or things that you didn't think of that make that 65 mile per hour car better because they weren't conditions you can trade off. For example, maybe it's a, maybe it's lighter o r a better color, or it's more streamlined o r more comfortable seats o r s ome t hing, right? You can't consider any of those, which again, this is why the c ustomers like LPTA until they get to the finish line and go, oh crap, I can't have that one. N ope.

Paul: 7:58

Right. You have to define technically acceptable in advance. You don't get to look at all of the offers and then decide which one is the most technically acceptable. You have to know that upfront.

Kevin: 8:08

That is hard to do.

Paul: 8:10

The last piece that the FAR helps you with it here, it says exchanges may occur.

Kevin: 8:15

and we actually don't have an episode about exchanges yet, but, but in short, that's one step short of discussion. You're clarifying information back and forth about your proposal is the simplest way to put that,

Paul: 8:26

right, if the government doesn't understand something about why you would be technically acceptable or not. They can ask some simple questions without going too far to clarify whether or not you're above that line. To explain this a little more, let's bring this into our personal lives. If it's midnight and you're driving home from somewhere and you're starving because you haven't eaten all day, you might choose to feed yourself using the lowest price technically acceptable methodology. I don't want to imply that I'm saying anything bad about any companies or corporations here, but you might choose Taco Bell. It's open at midnight, it's super low priced, and it technically it qualifies as food. Might not be the most nutritious food, but it qualifies. If you are technically acceptable, line is must be edible. Well, there you are, although some people would not even call it Taco bell at a edible. I don't want to get into that. On the other side of this, if you were going to propose to your potential spouse or go out to an anniversary dinner, maybe LPTA isn't the way to go. I'm not sure that would go over real well at Taco bell or or like we were talking about before. Maybe your definition of technically acceptable becomes much more complex. Then the Taco bell example, which must be food.

Speaker 3: 9:51

If it's a special dinner. I'm thinking that your. Your definition of technically acceptable should be a little bit higher than Taco Bell.

Paul: 9:58

Right. Maybe you get to the point of must have tablecloths, must have waiters valet parking. There has to be a guy in the corner playing piano to give it a little ambiance. You could run an internal LPTA competition between fancy restaurants and it just by checking boxes and then saying, oh great, I've looked at the menu and this would be the lowest price for my proposal dinner. It's more likely that you're not going to use LPTA. When it gets complex like that, you're going to use more of a tradeoff methodology where you say, wow, the place with the guy playing piano in the corner is way expensive compared to this other place that has all my other requirements, but no piano guy, so I'm going to trade off piano guy to save some money here and I think the proposal will still go well

Kevin: 10:43

and you're likely to ask for a referral. You may have heard of these places to go to this. They did this proposal dinner at places that have history that they have some past performance and again, if you're doing pure LPTA says you don't have to look at past performance, so imagine if we got some guy that plays piano. Yeah, he's 17 year old playing chopsticks. He's playing piano. He meets the definition, so just, you know, be careful.

Paul: 11:06

Right. With Taco Bell, you don't necessarily need t he p ass performance o f one taco bell versus another Taco Bell. They're all g oing t o be about the same. They should be h ere for fancy restaurants. C ould be wildly different. You could accidentally stumble into t he one of those piano bars w ith the dueling pianos w here everybody's drunk and yelling the whole time might not be what you expected.

Kevin: 11:28

You know what though? When you propose there, it's going to be an event. It is. We're already talking about my car, how I bought my expedition through using the LPTA, but understand that there were still the definition of technically acceptable. It was easily definable. It was priced, but it also had to have certain features. It had to be big enough, etc. Etc. I mEan, if it were just as pure concept of I need transportation to get me from a to b, if everybody just needed that, then we would all just by toyota corollas, they're low cost, they're highly efficient and they're really easy to buy, but it's usually not just price, it's price and something else and that's something else. Is ethetically acceptable and unless you can clearly define that, it can be really hard to pull off an LPTA.

Paul: 12:10

We talked about LPTA In an earlier episode about the best value continuum and examples we use our daycare services. If you were going to hire someone to watch your children while you're at work, do you really want the least expensive? Are you going to use lowest price as the sole criteria for choosing a daycare provider? I would say probably not. You're probably going to trade off. well, this one is close to my house. It's on my commute. This one has all kinds of certifications that other ones don't have. Every kid that's come out of this daycare has become a junior einstein. Maybe those are good things that help you choose

Kevin: 12:54

and you're going to get references. You're going to look at their past performance. Exactly. Where do I coworkers, where are their kids going, and yes, price is always a factor because if prIce were no option, somebody would come in a private limousine and get your kid every morning, but that's not a case for most people. So you still have this price factor in there, but you got to know where in the market are you.

Paul: 13:13

The other example we use is buying a stroller, so you're just going to push your kids around you little contraption with wheels. Do you want the least expensive stroller? Maybe you do, but maybe you want something that is a little safer, a little more durable.

Kevin: 13:31

When my wife and I first my first head kids and you go into the was it babies r us or whatever it is, and you're looking at the options that are available. You had no idea, right? Well the, the extreme versions of on one end you've got with the umbrella stroller that has no storage, weighs like a pound, you know, whatever. And then you've got like the cadillac. Well the funny thing is the coolest cadillac. We were at disney last weekend and we just walk it through one of the resorts and we see like this. It literally looked like a, like a baby version of cinderella carriage. It was all ornate and gorgeous and my daughter's like, oh, that's really cool. My wife says there's no where to stroe anything, her definition of LTPA was very different than my daughters. So just be aware of that, that, that that's why buying his shoulders. It's a great example because the strata of options is kind of mind altering.

Paul: 14:19

yeah. And that's an interesting way to think of LPTA because I guarantee you that, that the, the cinderella carriage stroller was not the lowest price, but it's where it's the technical acceptability, right? Your wife's definition was must have lots of storage to carry all this stuff. Your daughters might have been needs to look really cool, like a carriage. And the family that bought that, I don't know if they did trade off our LPTA but, but obviously they're technically acceptable criteria were different. That's the trick to LTPA, it's not just about lowest price for anything that that roughly meets the description. It's defining what is technically acceptable. The ultimate LPTA joke goes back to the rockets we used to launch people to the moon and the old joke is you got guys sitting on the launchpad in the capsule ready to launch, thinking about the fact that they're about to be thrust into the atmosphere and to the moon on a rocket built by the lowest bidder and I'm pretty sure that's not how the government chose to to to buy those rockets, but it's interesting to think of it, right? That's a situation where you might not want to have to specify technical acceptability on all those parameters and just choose the lowest price. You might want to trade a few things off

Kevin: 15:42

and that concept is entered. The lore of movies. We're going to it. You'll hear that in the movies. They say, oh yeah, like in a, in a space movie. Oh yeah, we're on the rocket. Me by the lowest bidder and if you're in this environment, you know that's not true, but that's the mindset that that's how the LPTA mindset gets spread.

Paul: 15:56

Let's pause here and link this to the acquisition and execution time zones. If we're talking source selection strategy, what acquisition strategies should you use to acquire whatever you need to buy? This happens in the acquisition time zones during the market research zone. This is when you've built your requirements and now you're trying to figure out what's the most efficient way to buy them. You're dealing with the ramifications of that decision in the rfp zone and in the source selection zone, but market research zone is where the decision should be made in the execution time zones. This lanes in the recompete zone where if the government is going to buy more of whatever they bought last time, they're trying to decide, have we moved to the point where this is a commodity and LPTA is all we need to get the results that we're looking for

Kevin: 16:44

and and even if the. The items you're buying have become commoditized to the point where you could buy them LPTA. Sometimes we have to be careful we're not slipping into calling a n LPTA buy ju st b ecause all of the pieces that we're b uying ar e L PTA. R emember that th ere w a s a a n o rganization of all those pieces.

Paul: 17:01

Choosing the right acquisition tools to buy what you need is very important. PriCe matters, but it's rarely the only thing that matters.

Kevin: 17:11

Price it's a competitive advantage. Having a lower price, but sometimes it's the only competitive advantage if you're walmart, but in reality a lot of times it's not. We helped a customer educate the government user on yes, these things that we're buying individually, lowest prices, the way to get them, but putting them all together into a system that the military user can benefit from. That process is not LPTA. We helped one of our customers educate the government on the difference between those two things.

Paul: 17:42

And th government moved off of LTPA and to a strategy that that benefited your customer. In that case.

Kevin: 17:49

Yes, and then i t ended up effectively being almost like a two step sealed bid w here there were pieces of it that w ere still LPTA, but understanding h ow applying those pieces in a way that y ou k now, y ou put, how do you put the puzzle together, I can buy you all the pieces of the puzzle, but it's the putting them together. That's the skill that the contractor brought and that c an't be bought LPTA, but in this case we convinced the government to break them into two pieces and evaluate them differently and LPTA can be a lot more efficient than it is actually effective. In my car story when I was applying a ford expedition, it was very efficient be cause I w a s b uying a new car, but when I'm buying a used car, LPTA is not an effective strategy. It c an be massively frustrating because you're comparing all these different elements of a u sed car like mileage and color and wear and tear and all these things that are subjective.

Paul: 18:37

Yeah, that makes complete sense. If you're buying a new car, you're comparing exactly the same thing, buying it from different sources. it's going to be this model year with these features and how much does it cost and it's really easy to compare exactly this from this, from this, and choose the lowest price. If you're buying a used car, that becomes so much more complicated because like you said, might be the same model year, might have the same features, even if it has exact, same miles or are very close to the same mileage. Those cars might have been treated differently or service differently, maintained differently over the years. There's a lot of things that you have to take into account, so just say I'm going to buy the least expensive car that I can find. That is this model from this year is not a path to success.

Kevin: 19:23

Remember in the in a three deciders episode in episode 118, we talked about the economic decider the person who funds the purchase, the user, the person who uses it and the contracting officer or the acquirer or the procurement person. Those are the three deciders. In that episode, well they see LTPA very differently, the economicdecider loves it because it's cheaper. The contracting officer or the procurement person probably loves it because it's faster, but the user probably hates it, so you have to be careful and depending on the circumstances, one of those three is going to be unhappy, but understanding in that car example that used car, if I buy a used car quickly, that's the lowest price and I give it to my teenage daughter and she's going to go, I don't like this.

Paul: 20:02

and it is easy to get it misunderstood. again, defining what is technically acceptable is the key upfront to all those people being happy. In my experience, that doesn't work out that way very often.

Kevin: 20:15

That's really hard. The government cares about this because it creates risk. What happens if someone can just buy in at the lowest price with no past performance, which we talked about that. That creates risk. Some questions to consider, and I wish I'd seen these more clearly when I was a contracting officer, is LPTA may apply. If any vendor can do this. If anybody going back to my ford expedition, if I have to get the car serviced, I can go to any ford dealer. Right? Also do. Do we really care about past performance? If it's a commercial item and it might be easy to do via LPTA in services, this is pretty unlikely getting services through LPTA, which in short think about you want to look at past performance. It's really hard to compare people as a commodity. Just saying,

Paul: 21:04

we talked about that in many episodes. The government's trying to buy, for instance, engineering support services and they need people that have top secret clearances, so what's going to happen if you choose to do that in an LPTA manner? Do you want the least expensive engineers that have clearances available? Maybe not.

Kevin: 21:26

Yeah. Well, what we'll do a whole dIfferent episode of LPTA services. that'll be a fun one. Another question to ask is, can you live with the risk? Can your user live with the risk of someone buying in? Because if past performances in a reference and lowest price is all that matters, if they met that low, low bar and then you give them a contract, is your customer going to be happy? What's the risk of them not being happy? Right, and here's why I hadn't considered, but I was a contracting officer who's actually going to bid. How many companies aren't even interested in bidding? If it's all LPTA, I mean somebody will bid, right?

Paul: 21:59

Right. If you know that walmart has the lowest prices and you can't sell it for that low, you might not even compete.

Kevin: 22:06

And more insidiously as a contracting officer, I don't know. They made that decision, so there's an entire segment of offers who I never even hear from because they all just walked away and I didn't even know it.

Paul: 22:17

From the industry side, the race to the bottom from a price perspective is generally not profitable or sustainable. Scale is your only hope. If you're not walmart or amazon or apple, you can't even compete.

Kevin: 22:30

And this goes back to my point about it's called customer selectivity.

Paul: 22:34

It's what you were talking about from the government side. If my company can't win a low price shootout, I won't even bother to bid, so if you're on the government side and you want a wide variety of choices and you say we're doing this LPTA you may not get a lot of choices. You may only get one choice and the the company that can, that is selling at scale, but selling something that might not be exactly what you need

Kevin: 23:03

and is it going to be the best company to do it? Yeah. It goes back to the clients electivity thing. Is it a lot of customer skyway included? If somebody is just shopping on price, we're not the cheapest company out there. I won't even bother entertaining them because I know that I'm not going to make them happy. I'll send them to somebody else. Whose focus is just price.

Paul: 23:21

You mentioned buying in before. It should explain what that is. Some companies may consider LPTA as a way to buy in. You bid at a low price, a lower price than you can actually make any profit on in order to win, and then you hope that you're going to get well later through engineering change proposals or additional quantities. Not a great strategy, but unfortunately it is used. Some companies look at LPTA as, hey, our only way to win this is to go low on price, and then they make it a nightmare later to manage the program because they're trying to build in more ways to make money later. Other companies look at LPTA and say, ah, that's a trap that just increases the chances that I might fail to deliver and then I'm going to have poor past performance that haunts me in future competition. Right? You look at it and say, I could bid the lowest price possible, but that's not how I want to do business.

Kevin: 24:23

Some people in the industry consider LPTA to be a lazy acquisition strategy and it's a harsh way of saying it, but again, I didn't see that as a CO. That's the perception of LPTA from the industry viewpoint is it.

Paul: 24:36

we don't want to do all the work to do all the tradeoffs, so we're just gonna pick the lowest price.

Kevin: 24:41

Yeah, and that that sends a message and it might not be the message that you want to send.

Paul: 24:46

Sometimes the government says they're going to do best value, but it becomes a defacto LPTA when they get to the evaluation, they call it a best value order trade off, but low price wins every time, like we were talking about. It does take more work on the government's part to do a true best value trade off and it takes more documentation. This is where the industry needs to be able to talk to government to help them understand what value you get by paying a little more so the government can document it, defend it, and award to something higher than the lowest price. Lowest price is an easy thing to justify all those tradeoffs. Take more work.

Kevin: 25:23

Skyway actually helps our customers explain that very concept to their government customers, but again, that's a topic for another day.

Paul: 25:30

Yeah. You mentioned that before you actually talked a government customer off the LPTA ledge and into a different strategy that actually benefited your customer

Kevin: 25:39

and it made sense because portions of their requirement, we're still LPTA, which LPTA does make sense in certain scenarios, but not saying it never applies. It applies sparingly.

Paul: 25:49

All right, kevin, let's wrap this up.

Kevin: 25:51

On the government side, consider which vendors you're driving away with an LPTA I, I didn't see that as a CO. The fact that the FAR expects past performance to not be a factor and LPTA is. It shoWs you just how homogenizes requirements are on the industry side. Assume the government's not lazy. I didn't realize how ineffective it was to use LPTA in certain circumstances. I mean, I thought it was a great model. It was faster with more efficient and I always got competitors and then that seemed to work.

Paul: 26:22

So LPTA works as far as efficiency. Yes, you can award fast, low price done, but that doesn't bring in the results to the users, the uLtimate users of that, whatever you bought later. So it's funny. Yeah. As a contracting officer, I always want to get that cranked, turn it and get through things faster because I have more things to buy. Then I have to buy. I'll wrap up by just cautioning. You get what you pay for. if you want the lowest price, technically acceptable. That's what you'll get. You don't get to decide later that, oh, well, I want. I want it to go 65 miles an hour instead of 60. You don't get a little more. You get the lowest. There are many things that are very appropriate for LPTA like we've been discussing, but would you choose LPTA to to buy a parachute if you're going to jump out of a plane and trust your life to this, do you want the one that was built by the lowest bidder and all that comes with that? Not sure. Alright, I'll talk to you later, kevin.

Kevin: 27:24

See ya Paul

paul: 27:24

all right, that's it for this episode. If you need help talking to your government customer acquisition strategies, skyway acquisition can help visit ask skyway.com to learn how use for joining us. We'll see you next week.