The LPTA Environment – Here to Stay?

In the current government contracting environment, LPTA is becoming a very common acronym. What does LPTA stand for, you might ask?  It stands for Lowest Price Technically Acceptable (LPTA) procurement efforts and if you haven’t heard of these yet, you may possibly be familiar with them in the near future if the government chooses to keep them around.  LPTAs are notably different from the traditional procurement efforts where the government awards contracts to those with the best technical proposals.  They are in fact quite the opposite.  LPTAs have minimum technical requirements with a majority of the onus being on pricing.  The focus on lowest price may perhaps be beneficial to those contractors who are not current market leaders in specific technical areas.  However, at the same time, LPTAs can lead contractors to develop low pricing strategies which may in turn increase the risk of contract performance down the road and lead them to use inconsistent accounting methods.

With the price of these LPTA efforts being the main evaluation factor for award, techniques for pricing have become somewhat inventive.  With this new found creativity comes an important responsibility for contractors to remain consistent with CAS and FAR requirements as well.  A few of the most risky pricing techniques involve staffing, compensation, and direct labor mapping.  Contractors who are incumbents have been known to cut salaries by 15 to 20 percent to retain these positions.  On the other hand, in order to unseat incumbents, competing contractors have evidently hired employees at $30K to $40K for positions that require post graduate degrees.  Additionally, contractors are tempted to map employees with lower rates that do not meet exact labor category requirements because they are confident that their personnel can perform the work.   With this strategy, DCAA can quite possibly disallow hours of personnel not matching labor categories upon audit.  In the LPTA environment, Procurement Contracting Officers (PCOs) can also conceivably direct contractors to bid cost inconsistent with accounting practices noted in CAS 401, 402, and 418 leaving it imperative for contractors to know what is consistent with CAS requirements and to also remain consistent with accounting methods noted in their own disclosure statements.  It is too early to tell whether the LPTA environment is here for the long haul but there has been pushback from government proposal evaluators recently stating that LPTA evaluation criteria limits their ability to exercise reasonable judgments.  Looks like we will just have to wait and see how this story ends.

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