On 4 Mar 15, Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics, issued a letter on appropriate use of LPTA source selection process and associated contract type.
This letter states that LPTA source selection process is appropriate when you have well-defined requirements, minimal contract performance risk, price is a significant factor, and there is no “value, need, or willingness to pay” for higher performance (as you would in a trade-off).
Take a minute to read the letter using the above link and then let’s talk about what you’ve read. Here is my take.
POINT:
Well-defined requirements
COUNTERPOINT:
I’ve been in Federal contracting for over 32 years. The one TRUTH I have found that never changes is that the government rarely has “well-defined requirements”. Since the main gist of the USD/AT&L letter was service contracts, I will focus on them. There can be many reasons why requirements are hard to identify in service contracts.
First and foremost is the “greening” of federal employees. I’m talking about the average age and experience level of the workforce. In 1983, one of the first briefings I attended stated that 85% of the federal workforce could retire within 5-10 years. Now you’d think this would have started them planning how to deal with this statistic. But they didn’t. In fact, the panic is just now beginning (again). Far too late to fix the problem. There is simply no way to grow a seasoned workforce overnight. So you have contracting officers (CO) and program managers (PM) that have 5 years or less of experience attempting to define the requirements on a major service acquisition.
Second reason for poor requirements is simply that federal contracting as a whole is not forward-thinking. If there’s a way of doing radar maintenance, clean room decontamination, or elevator maintenance, we tend to believe that is the ONLY way it can be done. So instead of detailed market research to find better, more innovative, cost-effective methods of doing the work, we keep using the same outdated requirements, presumably because it is faster to just award the same contract again than to take the time to do market research (listen to Contracting Officer Podcast 021: “Why pre-RFP communications Matter ” for more details on this point).
POINT:
Minimal contract performance risk
COUNTERPOINT:
What about minimal contract performance risk? This one will be short. If the federal team (this includes everyone from the CO to the PM to the attorney to the review teams) does their job during a source selection, award will be made to a contractor where there is little likelihood they cannot perform. Period. This is always the goal, and frankly, whether the contract is awarded as LPTA or best value does not affect how well the contractor will perform after award nearly as much as how well the requirement was defined and whether the contractor effectively proved they could do the work.
POINT:
Price is a significant factor, and there is no “value, need, or willingness to pay” for higher performance”
COUNTERPOINT:
I’m going to combine “price is a significant factor”, and “there is no value, need, or willingness to pay for higher performance”. Price should ALWAYS be a significant factor. Gone are the days of DOD defense dollars flowing like a waterfall. In many areas, that has become a slow drip! So I question when any federal agency would EVER be willing to pay for higher performance than needed.
POINT:
CPFF-LOE Type Contracts
The letter encourages the use of CPFF-LOE type contracts and discourages the use of T&M.
COUNTERPOINT:
Let’s talk a little bit about T&M contracts. I take my car to a mechanic to find out what that dreadful noise is under the hood and he says he’ll diagnose it for $50 and then fix it and I’ll have to pay for the parts and his labor. That is a time and materials contract. It is something we all use in everyday life. Is that mechanic incentivized to get the work done quickly? Not really. But if he takes 3 days to do a 1 day job, guess what? I’m not taking my work to him anymore. So he IS incentivized to get the work done correctly in a timely manner.
I have seen T&M contracts work extremely well in federal contracts. Should they be used for every contract where we have undefined requirements? Of course not. But this overwhelming condemnation of the use of T&M contracts does not make sense to me.
BOTTOM LINE:
So based on what I’ve said, it sounds like it will be a tough row to hoe to be able to use LPTA.
What is this letter really saying? First “limit” the use of LPTA source selections unless you are buying non-complex, non-critical items and services. If you are using LPTA, you should be able to use an FFP type contract. If you have less defined requirements, don’t use a T&M, but use something like a CPFF-LOE type contract. And finally, as a CO or PM, be prepared to fight to justify your every decision/action along the way.