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Procurement may be trending toward value over price

This analysis was first available to Bloomberg Government subscribers

The number of times federal agencies have requested lowest-price, technically acceptable bids in contract solicitations has shot up over the past decade, an examination of Bloomberg Government data shows.

Federal contract solicitations stating that awards will be made on the basis of LPTA source-selection procedures have steadily grown, from 920 in fiscal year 2008 to more than 12,000 in each of the past two fiscal years, according to Bloomberg Government data.

But contracting industry groups and, increasingly, members of Congress have been agitating for a best-value purchasing approach in more cases, taking into account other factors, including whether the benefits of higher-priced proposals are worth the extra cost.

This renewed priority for best-value procurements has been reflected in the fiscal 2017 and 2018 defense authorization bills in Congress, which significantly narrow the range of types of procurements in which the Defense Department can use LPTA as a guiding philosophy.

Pursuing best-value purchasing instead of LPTA is also the goal of a bill sponsored by Rep. Mark Meadows (R-N.C.), chairman of the House Government Operations Subcommittee. His bill, which passed out of committee by voice vote Sept. 13, would extend to all federal government agencies language in the 2017 National Defense Authorization Act that applies now only to DOD procurements.

To longtime contracting policy observers, these developments together mean just one thing: The government may soon buy based more on value considerations, and less often using lowest price as its main, or sometimes only, focus.

“The pendulum is starting to swing,” Stan Soloway, president and CEO of Celero Strategies, a consulting group focused on the federal market, told Bloomberg BNA. “It’s been a long, long slog.”

Getting the Message

The federal acquisition workforce for years has relied too much on LPTA as an easy answer, said Soloway, the former longtime president and CEO of the Professional Services Council, a trade group for service contractors. But this is, in large part, no fault of their own.

Until recently, the pertinent laws and regulations — on top of the consistent congressional calls for keeping contracting costs low — have led them and their bosses to this mindset, he said.

“They haven’t been given the incentives, or tools, to make different decisions,” Soloway said.

Moreover, the “pressure is always on them,” he said — whether the solicitation is LPTA or best value — to reach the best price on any given contract to save the government money.

“Congress and industry get the message” that best-value procurements are preferable in a number of situations, Soloway said — “but that message needs to get down to the workforce level, too.”

‘Best Value Matrix’

Best-value procurements use a “trade-off process,” an analysis that provides agencies an ability to weigh the potential costs and benefits of proposals including factors other than price.

Best-value contracts are imperative for IT services, construction services and the like, where it can be difficult to put a price on skill sets, experience levels, and technical benefits provided by different companies, according to industry groups and their lawyers.

When purchasing many goods — especially simple, well-established commercial items such as office desks and paper clips — LPTA proves to be an efficient and wise choice, observers said.

But when buying body armor for soldiers, or other products directly tied to the health and well-being of U.S. armed forces, gauging value again becomes a necessity, Nick Solosky, a partner with Fox Rothschild in Washington, told Bloomberg BNA.

“If you have LPTA [language] in a fuel contract, that makes sense,” Solosky said. “But for services, it can be a real concern. That’s where the best-value matrix comes into play.”

Trump’s Tweets

Increased use of best-value procurements, and a simultaneous reduction in the use of LPTA, has gained bipartisan support.

In addition to Meadows’s efforts in the House, several prominent Obama administration officials — including Frank Kendall, the former undersecretary of defense for acquisition, technology, and logistics, and Anne Rung, the former administrator of the Office of Federal Procurement Policy — have spoken out in favor of best-value procurements.

It’s less clear where the Trump administration stands on the issue.

The fact that the president has yet to nominate someone for the top OFPP post — the most important procurement policy job in the federal government — adds to the confusion, Soloway said.

The best indicators to date, Soloway said, may be then-President-elect Donald Trump’s tweets late last year on a couple of massive government contracts.

Trump tweeted Dec. 6, 2016, that Boeing’s costs to build a new Air Force One were “out of control.” The following week, he went after Lockheed Martin over the costs of its much-delayed F-35 Joint Strike Fighter.

Defense Secretary Jim Mattis issued two memos Jan. 27 calling for a review of the F-35 and Air Force One programs.

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