Something federal contractors thought they’d gotten rid of is popping up

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A form of contracting known as lowest-price technically acceptable, or LPTA, has long bugged federal contractors. Defense authorization legislation, and subsequent updates to the Federal Acquisition Regulations, were supposed to limit agency use of LPTA. But contractors say they’re seeing a resurgence. Federal Drive with Tom Temin turned to David Berteau, the president and CEO of the Professional Services Council.

Interview transcript:

Tom Temin: President and CEO of the Professional Services Council, David Berteau. And this is something like kudzu, I guess, no matter how much it gets cut back, it just comes on again. What do you seeing?

David Berteau: Tom, LPTA has been with us for quite some time as you know. More than a decade we’ve been struggling with how do you appropriately use lowest price technically acceptable, because there are certainly circumstances where there’s no technical difference between the top and the bottom, and it makes sense to go to the lowest price. But those circumstances are not common, and not widespread. PSC for quite some time has been eager to get this problem under control. And it’s not just a problem for contractors, it’s a problem for the government as well. Because if you’re not careful, you don’t get the performance, you don’t get the results that you are aiming for. And it could end up through change orders and cancellations and recompetes, costing both more time and money than going with the best bid at the time of the offer.

Tom Temin: Alright, so there was a gambit in Congress. And as you mentioned, the Federal Acquisition Regulation to limit the use of them. But did it really limit them or was it just a temporary setback from what your members are saying?

David Berteau: Well, it’s a long saga and it’s been an interesting one. If you go back to 2015. And the Defense Department, the undersecretary of Defense for Acquisition at the time, put out a memorandum ostensibly putting out guidelines for the appropriate use of lowest price technically acceptable contracts. LPTA. But those guidelines were not incorporated into the regulations. And as you and I both know, most contracting officers don’t wake up in the morning and say, oh, is there another memo from OSD that I need to examine here? They follow what’s in the regulation. So what we did at PSC was beginning of that year, beginning of the following year, in 2016, we work to get the language into the National Defense Authorization Act, and it was incorporated into the FY 17 Act, which was signed by Barack Obama in late 2016. It said, put these rules into the DFARS within 120 days. They missed by about 1000 days. But they did eventually issue a final DFARS rule. I think it was in September of 2019 actually, to incorporate the language. The question becomes, how do you measure compliance with this DFARS clause? Because it says LPTA is useful in a number of cases. But you need to have a number of criteria that you meet, and you need to, as a contracting officer, document those criteria. You need to be able to describe the minimum requirements in such a way that you can determine whether offers are technically acceptable or not. You need to make sure that there’s no value that the government would get from somebody proposing more than the minimum technical requirements, right, and a series of other characteristics that have to be met. We asked DoD at the time that the DFARS clause was issued, said, how are you going to measure compliance with this? And the answer we got from a senior procurement official was, we’re not. We’re gonna leave it up to you guys to figure out where this comes into play. And that’s not surprising, right? There’s no enforcement mechanism to measure all of that. We assume that contracting officers comply with the rules. So that’s where we stand right now with DoD.

Tom Temin: Yes. So this rule is fine for say someone buying 100 Kodak scanners. And every contractor says we’re going to deliver them unwrap them and plug them in and set them up, then you buy the lowest price. But essentially, the issue here is services contracts or things where there is no single one way to skin the cat for the requirement that the government needs. The question is are the requirements sufficient to rule out LPTA?

David Berteau: The statute went further and it actually said you should not use LPTA for information technology services, for cybersecurity services, for systems engineering and technical assistance services, for advanced testing, audit readiness and a whole host of other things, including, by the way with some foresight, personal protective equipment. You want N95 masks that are actually N95 masks, not the lowest price, as we saw with the seizure of 10 million counterfeit masks a couple of weeks ago.

Tom Temin: N94.

David Berteau: Right, right, exactly. And you wanted to make sure that in fact, you used it where it’s appropriate. After the DoD rules were put into place, there was a second set of rules because PSC wanted to apply this obviously not just to DoD because the problem is growing in the civilian agencies as well. And so in the FY 19 National Defense Authorization Act, additional legislation provided for the extension of LPTA regulation and controls to civilian agencies and we finally got a FAR clause out on that. Again, the question of compliance, the question of enforcement, the question of who’s following these rules remains ambiguous. And what we’re beginning to hear from our members is an increasing amount, increasing number of contract RFDs, RFIs, statements of work and evaluations that look, sound and feel like LPTA.

Tom Temin: We’re speaking with David Berteau, president and CEO of the Professional Services Council. And it’s probably not going to get much relief lately. I mean, General Austin is now Secretary Austin. He probably doesn’t even know what LPTA is, not to take away from the man, but it’s not something in his career he’s been concerned with, so, we don’t have those fill-in levels at the policy offices at DoD yet in the Biden administration that could take this on, so, what’s the plan? Just to live with these contracts and then when those people are in place, renew this issue?

David Berteau: Well, first of all, it’s important to recognize that contracting officers themselves are maybe in a tough spot here. And we’ve heard from a number of contracting officers over the years that part of the reasons that they revert to LPTA, is because the requirements are so poorly defined that they have no good basis for evaluating what really is technically acceptable. And you don’t want contracting officers making that decision, you want the technically proficient people making those decisions. So it requires closer collaboration between the program officers and the contracting officers. And I think those contracting officers who complain we’re not getting that have probably a legitimate basis for that. The second, of course, is LPTA is considered widely to be a protection against protests. But that has not proven to be the case, as you look at the protests that are filed quite a number of them say that you’re not following the rules, because oftentimes, it’s not stated as an LPTA contract. There’s no category you put it into. It’s the way in which the decision is ultimately made is the only way you find out that it was really LPTA. But I think the thing that we’re looking for at PSC is we’re collecting examples of this from our members as they hear from them. We’re raising with the agencies affected, both DoD and the civilian agencies. And if it’s true that the incidence is continuing to grow, as we think we’re hearing from our members, we’ll go back to the Congress and tighten up the legislation. One of the things that the legislation does is it asks the GAO to provide a report for three years. Those three years are now gone since it took them three years to actually get the regulation out. Most of the reports said they haven’t put the regulation out yet. Now that’s done. We’d like to see GAO take a harder look at this again going forward.

Tom Temin: All right, and just a quick question. There’s a big pressure cooker boiling away there in the administration, and that is the revision to the budget. We don’t know what it’s going to look like yet. At some point they’ll take the cover off, and we’ll either have a chicken or a goat’s head cooked in there. We just don’t know, what should contractors do in the meantime, just kind of wait by and see what happens?

David Berteau: Well, two things. And actually, it does connect to LPTA. Because we have seen over the years an increase in LPTA contracts when there is budget pressure and not as much money to spend. So that’s a cheap way of getting around the initial concerns. But I think what we’re looking for, number one, is the fiscal year 21 appropriations are fully in place, and are being obligated. And so there’s plenty of work to pursue, and plenty of work that needs to be done over the next six months. What we have to watch for, though, is what does the administration put out and what does Congress do with that? We’ll get some hints of that, maybe not until May. And so in the meantime, there’s uncertainty. What does uncertainty do? It means that the government may not spend the money they have, because they’re not sure how much they’re going to get for the next year, or when they’re going to get it. And so we’ve got to keep working on that.

Tom Temin: Yeah, so everyone’s going home in the evening. And when they say hi to their spouse, or maybe they come up from the upstairs office or the downstairs office. The first question is one, were you able to get a vaccine? And the second question is, were you able to get the contract?

David Berteau: Exactly. In contracts, were looking carefully at the ongoing contract obligation rates. They dropped in FY 20 in the first quarter compared to the previous year, even though we had a CR in place. Now that we’ve got full year appropriations in place starting December 27, we’re looking for an increase in contract obligations as well. The government has plenty of work to be done, and our members are ready to do it.

Tom Temin: David Berteau is president and CEO of the Professional Services Council. As always, thanks so much.

David Berteau: Thank you, Tom. Look forward to the next one.

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