In the last decade, we’ve all seen an effort on behalf of the government to cut costs and mitigate risk, often in the form of an LPTA vehicle (Lowest Price Technically Acceptable). Government contracts awarded under LPTA usually end up a lose-lose-lose-lose deal: for the companies that lose the bid; for the company that wins and is unable to deliver; for the Government, which ends up spending three times the amount to make up for lost time; and worst of all for the taxpayers who end up footing the bill. If you have a valued customer thinking of steering into an LPTA contract, the best course of action is to educate your customer and then educate yourself.
How to Head an LPTA Off at the Pass
While the contract shops have moved everything towards LPTA in the name of budget, the program offices are still expecting performance. When they go to execute, it’s a shock. They expect a high-quality deliverable with a low risk of failure, but what they get is a low-quality product or service with a high probability of failure or inadequacy. Here’s what you can do:
- Know your customer. Know enough about the customer’s mission and desired end state to be relevant to them. Are they even thinking of shifting into an LPTA? You should be walking the halls with the program manager often enough to get wind of any notions. Prepare yourself by learning exactly what they need and why they want an LPTA. Are they being pressured by the contract office or do they simply not know enough about the contract to see the potential problem?
- Educate your customer. Educate them on the paths they can take to ensure they get what they really want, as quickly as they need it. Discuss the options that are available that their KO might not know about. Maybe they have an idea but can’t come up with a solution on their own. This is your opportunity. Often, the program office doesn’t foresee the type of bids they’ll be forced to accept if they get into an LPTA. Your job is to help them understand themselves when the bare minimums won’t suffice.
If the Program Office Still Insists on the LPTA
“Sometimes, the worst thing that can happen is that you actually win that work!”—Pete, COO of a Mid-sized Government Prime Contractor
If you can’t influence your customer, it’s time to understand and educate yourself. Even if you’re dealing with a program office that wants the best value, if the contract office insists on LPTA, then you need to ask yourself: Is it worth it? What if you can’t deliver and get a bad performance rating? Certain solicitations, when they’ve gone LPTA, aren’t worth the headache of a price shootout, or the risk to your own reputation if you can’t perform.
Moving Forward on the LPTA Bid
How much can you compromise to win? This is a delicately balanced tipping point poised between your profit margin and the quality of your work. Finding that sweet spot goes back to understanding your customer and their priorities.
You might make a deliberate strategic business decision to win that work and cut your profit margin to get it. If you can still execute with less profit, anticipating future work, then it may be worth it long term.
If cost and price is a trigger point for your customer, can you cut back on the quality of work? It depends on what the customer specifically asks for. If they ask for both Q and P, you must give them both. Conversely, if they only ask for Q, then including P in your bid won’t win you the work if you can’t deliver it at the lowest price.
Some Tips for Making LPTA Work for Your Customer and Business
- Shape the procurement method so that the customer gets what they want and need. Move that customer towards a contract vehicle where they retain 100 percent selection authority, so they have the right to say no to a bid, even if it’s the lowest price.
- Help them get into a vehicle they can easily MIPR. The Military Interdepartmental Purchase Request (MIPR) is a method for transferring funds from one military organization to another to procure services, supplies, or equipment for the requiring service. Look for a contracting agency organization that can accept a MIPR of funds directly from that customer organization and execute the contract. Several of them exist that are DFAR (Defense Federal Acquisition Regulation) approved. They will provide contracting functions, will accept the MIPR and your customer retains 100 percent of the selection authority.
When you’re pursuing a contract bid, the solicitation method needs to match the customer’s priorities, the contract office’s priorities and your company’s needs. If it matches everywhere, pursue it. If any of those priorities aren’t in total alignment, specifically with an LPTA, it’s time to consider cutting your losses and move on. Education is the most important tool in your toolbox. Be in the know, know your customer’s needs and know yourself. Remember, not all business is good business.