The Hidden Cost of Compromise: Trade-Offs and Downsides of LPTA
April 28, 2020Jamie Boulet, Sr. Mgr. Business Development
Sometimes, you just get it wrong.
Take the 18th Constitutional Amendment. Regardless of its supporters’ good intentions, it has been argued the 18th Amendment led to the transformation of criminal groups like the Mafia into sophisticated enterprises. The 21st Amendment repealed the 18th Amendment; however, not in time to avoid the dramatic consequences of organized crime.
Another well-intended policy: Lowest Price Technically Acceptable (LPTA). In 2013, after numerous failed attempts to reduce the budget deficit, the U.S. Congress initiated the process of sequestration. LPTA became popular with procurement officials, but for the wrong reasons. Budget reductions and budget caps due to sequestration made cost rise to the top as a primary deciding factor in source selection—often to the detriment of technical performance. LPTA dominated the procurement mindset – grossly overshadowing the other sourcing option: the trade-off process. Where LPTA is appropriate when price is the only determining factor, the trade-off process allows for non-cost factors such as quality and performance to be considered when evaluating proposals.
The mandatory cuts to defense spending propelled the use of the LPTA initiative over the trade-off process, leading to concerns that DoD purchases of primarily low-cost products were negatively impacting the nation’s safety.
A good example of LPTA implementation proving disadvantageous can be found in defense avionics. Purchased with the LPTA policy in effect, commercially available displays, not designed for operation in avionic environments, were installed in the cockpits of both fixed- and rotary-wing military aircraft.
Commercial display products present a lower initial price tag; however, they make no guarantee of future availability, of performance within environmental constraints, of meeting optical requirements, or against electromagnetic interference (EMI). Built-to-purpose displays offer application-specific design control; long lifespans; and future form, fit, and function availability. By mitigating the risks of mission disruption from inoperability and EOL issues, purpose-built displays offer the lowest through-life costs.
Similar to the 18th amendment’s repeal, the DoD issued a final rule, effective October 1, 2019, that restricts the use of LPTA procurements. The final rule implements sections of the National Defense Authorization Acts (NDAAs), requiring the DoD to avoid using LPTA evaluations when doing so would deny the benefits of cost and technical trade-offs. The 2018 NDAA requires that eight conditions be met before the DoD could use LPTA procurements and sets forth a priority for best-value source selection.
- Minimum requirements can be described clearly and comprehensively, and expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
- No, or minimal, value will be realized from a proposal that exceeds the minimum technical or performance requirements;
- The proposed technical approaches will require no, or minimal, subjective judgment by the source selection authority as to the desirability of one offeror's proposal versus a competing proposal;
- The source selection authority has a high degree of confidence that reviewing the technical proposals of all offerors would not result in the identification of characteristics that could provide value or benefit;
- No, or minimal, additional innovation or future technological advantage will be realized by using a different source selection process;
- Goods to be procured are predominantly expendable in nature, are nontechnical, or have a short life expectancy or short shelf life;
- The contract file contains a determination that the lowest price reflects full life-cycle costs of the product(s) or service(s) being acquired; and,
- The contracting officer documents the contract file describing the circumstances justifying the use of the lowest-price technically acceptable source selection process.
In addition to the above conditions, the use of LPTA procedures is expressly prohibited in procurements for the following goods and/or services:
- Items designated by the requiring activity as personal protective equipment or an aviation critical safety item, when the requiring activity advises the contracting officer that the level of quality or failure of the equipment or item could result in combat casualties;
- Engineering and manufacturing development for a major defense acquisition program for which budgetary authority is requested beginning in fiscal year 2019; and
- Contracts for auditing services.
Conditions 2, 4, 5, 6, and 7 speak directly to how the technological advantages of purpose-built displays were a casualty of LPTA and how its narrow, continued practice could be detrimental to the DoD’s mission. Mercury’s mission-critical display line delivers highly specialized AMLCDs with each characteristic of the AMLCD made configurable: resolution, color depth, color saturation, display technology, and mechanical packaging to fulfill all application requirements. Environmental factors, such as high and low temperature ranges, and vibration and shock exposures, are accounted for during the display’s design to bolster operation in rugged environments. Built-to-purpose displays, engineered to meet the demanding environmental and optical requirements of military applications without making critical trade-offs in performance, are especially affected – and stimulated – by this new final rule.
Sometimes, you just get it wrong. A rule put in place to solve one problem can create another. The DoD’s final rule endeavors to rectify the unwanted effects of the LPTA policy. The new rule clarifies that goods from commercial suppliers should not be given favor over the technological advantages gained through innovation provided by experts in aerospace and defense industry simply due to low cost. Cheers!