Contracting groups challenge DoD’s ‘flawed’ plans for $17.5B contract

The Professional Services Council and IT Alliance for Public Sector say lowest price technically acceptable is the wrong process to use when evaluating ENCORE I...

Two federal contractor associations are challenging the rationale behind the Defense Department’s plans for a multi-billion dollar procurement.

DoD is looking for bids on a $17.5 billion multiple-award IT contract, ENCORE III. But it’s using the “lowest price technically acceptable process” to select among  bidders. The Professional Services Council and the IT Alliance for Public Sector released a letter April 28 warning that this process is not the right fit for this particular contract, and will lead to negative consequences if the DoD pursues its current course.

ENCORE contracts are multiple-award agreements that cover all activities within the military services and the Defense Department. The contract provides cybersecurity, web-scale IT, cloud-based disaster recovery and other IT services.

The letter, sent to DoD Undersecretary of Defense Frank Kendall on April 22, called this a “flawed procurement” and listed three reasons why LPTA is the wrong process for ENCORE III.

“First, the technological complexity of the solutions to be acquired under ENCORE III, and the disparate technical capabilities possessed by different companies, necessitate that companies be judged by their capabilities if quality solutions are a desired outcome,” the groups said.

In other words, instead of solely focusing on who can deliver mediocrity with the lowest price tag, DoD instead should consider which vendors are most qualified and capable to deliver a product that will actually work well, and make it clear up front what they’re willing to pay for capabilities that exceed the minimum in order to encourage innovation.

This was precisely the subject of an April 1 memo from Claire Grady, DoD’s director of Defense procurement and acquisition policy.

Over the past few years, LPTA has become more widely used, whether or not it was specifically called out in the contract requirements.

That caused some problems for DoD. Industry has long complained that “technically acceptable” is not well defined.  Some companies would lowball their bids to win contracts and then could not follow through on their promises. The government would then have to go through the contracting process again.

Also, as DoD bought some systems on the cheap, they would end up costing more money to sustain than if the government had invested more money into the original contract.

PSC and ITAPs also pointed out in their letter to DoD about ENCORE III that the skill sets of the workforce are constantly evolving.

“Second, the future labor market for technical skills over the next decade is inherently uncertain to such an extent that other evaluation factors beyond predicted labor category prices would better enable the government to select the most capable and best value industry partners,” the letter said.

In plain English, this means neither the department nor industry can currently predict how much IT skills will be worth in 2026. They can’t even predict what the required skills will be in a decade, because technology advances so quickly. The letter argued that instead of speculating with little to no evidence about labor rates for as-yet-unknown skills, DoD should evaluate companies based on “demonstrated ability to attract and retain top talent in cutting edge skills today.”

“Third, the prices being assessed for the LPTA evaluation are not the bid price for any actual work to be executed under the contract, but are instead based on an undisclosed mix of labor rate ceilings,” PSC and ITAPs said.

The appendix to the letter said that “the prices to be evaluated … bear no resemblance to the actual price of any actual work, or even hypothetical work, to be conducted under this contract.”

Essentially, it’s not an accurate estimate of how much labor companies may actually devote to a project, especially considering potential management or technical innovations that may reduce the amount of labor necessary to fulfill the contract.

The letter also said if ENCORE III is intended to actually live up to the term used in the contract, “information superiority,” then the procurement should consider quality of services over price as the main priority.

Alan Estevez, Kendall’s principal deputy, speaking to the Coalition for Government Procurement April 28, said the Pentagon has made its policies with regard to LPTA fairly clear through various memos and instructions, but emphasized that DoD also wants its contracting officers to think for themselves about the proper evaluation factors in a given source selection. To be clear, he was not responding directly to the letter.

“There is no guidance and there has never been guidance from DoD leadership that says, ‘Thou shalt do LPTA contracts,’” he said. “But the reality is that the contracting officers at an individual fort or air base may not know who Frank Kendall or Alan Estevez or Claire Grady is. This is about getting people the right training and continual improvement at places like the Defense Acquisition University. Not everyone’s going to be the best, but we’re going to try to get people to a place where they understand best practices.”

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