The LPTA vs. Best Value
Debunking the myth that contract spending seasonally fluctuates in the federal marketplace.
It is true that private sector spending varies depending on the time of year, but according to the Federal Procurement Data System (FDPS), this pattern does not correlate with the federal marketplace.
Do not let projected budget cuts, continuing resolutions and sequestration deter you or your company from pursuing government contracts in the federal marketplace. The federal market is still the highest spending entity in the world and can be a great source to generate revenue for your company.
1. The Contracting Community
The federal contracting community is now in the state of constant change after over a decade of virtually unchecked growth. According to USASpending.gov, in 2000 the federal budget spend with contractors was $220 billion and had been fairly flat in the preceding years. From 2001 through 2011, the rate of growth skyrocketed, capping at $550 billion in ten years with the Department of Defense seeing the vast majority of the increase due to the U.S. involved wars, terror attacks and the related intelligence efforts.
With current sequestration and budget cuts and resulting mandated reductions in federal contract spending, the federal marketplace is experiencing a ten percent reduction which has fueled a noticeable shift away from the “best-value” decision process towards a wider adoption of “lowest-price technically acceptable” or LPTA model.
2. The Tipping Point
The federal marketplace had operated in a similar low-price mentality environment pre-2000, when the pendulum started its swing away from that model after a defining tragedy occurred: the explosion of the Challenger spacecraft in 1986. At that point, low-price was the reigning decision-factor, and when the defective O-ring was identified as the cause of the explosion that killed all of the astronauts on board, it proved to be a compelling case to turn from low price to best value for many products as well as services.
That tragic tipping point marked the pendulum swing towards the era of best-value, where factors other than or in addition to price are considered in the contracting award decision process.
Now that the government is again using the LPTA model, a recent study where Centurion and Market Connections surveyed 360 government acquisition professionals and 375 industry executives has identified $27.7 billion in upcoming LPTA actionable opportunities.
Of the $27.7 billion, $7.7 billion are anticipated to be small business and socioeconomic category set-asides, the study said. The remaining $20 billion are expected to be full and open competition LPTA contracts.
About 56% of the LPTA opportunities are for construction, facilities operations/ maintenance and utilities/housekeeping. Professional and IT services account for 22%.
While contractors are generally not happy about the shift to LPTA, the study identified another $745 billion in the pipeline as “best value” contracts, proving that the pendulum is just gaining momentum in “swing” mode, nowhere near the final apex of all contracts using LPTA.
In either case, contractors are well-served to identify the contract vehicle and decision-making method as LPTA or best value before making a go or no-go bid decision on all upcoming opportunities.