Winning In The Time Of LPTA (05-08-13)
The last several times I have given my How To DO Price To Win (PTW) Studies, seminar, participant questions and conversations have been dominated by the federal government's latest 4-letter swearword, LPTA. If you haven't heard, LPTA, which stands for Lowest Priced, Technically Acceptable, is rapidly becoming the dominant acquisition approach that agencies are adopting to deal with sequestration-related budget cuts. In essence, LPTA is designed to yield bid prices that are a step down from the "best value" prices that agencies can no longer afford.
LPTA, when used to evaluate and award competitive contracts, requires that the acquiring agency select the lowest priced bid from among those proposals it deems to be "technically acceptable." Reasonable, you may say, and, I would agree... up to a point. But LPTA has a dark side that is beginning to dawn on government agencies and their contractors.
Contractors compete to have their employees fill about 16 million government contractor billets - I call this the government's "arm's length workforce." Hitherto, competition in the government arena has largely been based on the best value concept. Under this approach an agency selected the winning contractor based on an aggregated view of the perceived value of each bidder's proposed team, solution, staff, and past performance tempered by the offered price. This meritocratic evaluation approach has often allowed agencies to retain incumbent contract staffers even when the underlying contract changed hands.
With LPTA this is no longer going to be the case, since labor prices are being bid down to where experienced incumbent staffers are no longer affordable at anything like their prevailing compensation levels. To win a recompete, all bidders, including the incumbent contractor, cannot even bid those incumbent staffers who elect not to accept huge salary and benefit cuts.
So what happens to an agency's effectiveness when it can no longer rely on experienced incumbent staffers who often represent the agency's institutional knowledge? What happens to incumbent staffers that elect not to accept draconian salary and benefits cuts, and where is the "elsewhere" that incumbent staffers can go in a market populated by contractors who are facing the same "race to the bottom" problem as it relates to labor?
Contractors and Agencies - I feel your pain. Contractor employees - I fee your impending pain as well.
LPTA is likely to be around for a good while - at least until budget pressures ease. Agencies and their contractors will learn how to adapt to the new reality. Displaced contractor employees will face hard times but they, too, will adapt.
But, it is an ill wind that blows no good. The good that I see includes: innovation (e.g., for agencies to develop and retain institutional knowledge bases); more opportunities for newer entrants - companies and employees - into the government contracting marketplace; and, a renewed contractor focus on learning how to use information more effectively for developing winning prices with the support of a PTW framework and PTW studies. CAI/SISCo is, and will be, there to help.
LPTA, or not, please contact CAI/SISCo today to help juice your firm's business development prospects.
Good luck and happy hunting!