You Get What You Pay for: New Final Rule Limits Use of LPTA
Businesses and consumers make complex trade-off decisions every day when buying and selling supplies and services. Sometimes it makes sense to pay more or charge more for a supply or service when quality improvements, added features, or other considerations justify the price. Other times, paying more or adding features provides no meaningful benefit so we opt for the least expensive item that satisfies our needs. The federal government uses this same framework, dubbed the “best value continuum,” in negotiated acquisitions. On one end of this continuum is a full trade-off, where non-price factors, e.g. quality and past performance, take precedence over price. On the opposite end of the continuum is the lowest price technically acceptable (LPTA) process. Under LPTA, the government determines its minimum acceptable technical requirements and then seeks to award a contract to the lowest priced offeror who meets the minimum requirements.
Federal agencies have been criticized for overusing the LPTA source selection process, based on the concerns that LPTA procedures chill innovation and hamstring agencies who could benefit from trading cost or price considerations for technically superior capabilities. The business community also criticized government reliance on LPTA to purchase safety-related items; such items should not be purchased based on minimum standards.
In response to these criticisms, Congress included Section 880 in the Fiscal Year (FY) 19 National Defense Authorization Act (NDAA), stating: “[i]t shall be the policy of the United States Government to avoid using lowest price technically acceptable source selection criteria in circumstances that would deny the government the benefits of cost and technical tradeoffs in the source selection process.”
After a lengthy rule-making process, the Federal Acquisition Council has recently issued a final rule, effective Feb. 16, 2021, implementing Section 880 of the FY 19 NDAA. The new rule amends Federal Acquisition Regulation (FAR) 15.101-2 Lowest price technically acceptable source selection process by adding new criteria agencies must consider before using LPTA source selection procedures and by stating a strong preference against using LPTA procedures for the acquisition of certain categories of procurements. The effect of these changes will be to limit the use of LPTA procedures only to those situations where it is clearly in the government’s best interest.
Starting Feb. 16, 2021, FAR 15.101-2(c) will be amended to provide that LPTA source selection procedures shall only be used when:
- The agency can comprehensively and clearly describe its minimum requirements in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
- The agency would realize no, or minimal, value from a proposal that exceeds the minimum technical or performance requirements;
- The agency believes the technical proposals 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 agency 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 to the agency;
- The agency determined that the lowest price reflects the total cost, including operation and support, of the product(s) or service(s) being acquired; and
- The contracting officer documents the contract file describing the circumstances that justify the use of the lowest price technically acceptable source selection process.
Similarly, FAR 15.202-2(d) will be amended to require that Contracting Officers “shall avoid, to the maximum extent practicable” using LPTA procedures for the acquisition of:
- Information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, health care services and records, telecommunications devices and services, or other knowledge-based professional services;
- Personal protective equipment (PPE); or,
- Knowledge-based training or logistics services in contingency operations outside the United States, including in Afghanistan or Iraq.
While these FAR changes apply to non-Department of Defense (DoD) agencies, DoD already has implemented similar language in Defense FAR Supplement (DFARS) 215.101-2-70, which became effective in October of 2019.
The new FAR rule also amends several other FAR provisions by referencing FAR 15.202-2(c) and (d) to ensure the new limitations for the use of LPTA source selection procedures apply equally to acquisitions of commercial items (FAR Part 12), acquisitions using the simplified acquisition procedures (FAR Part 13), acquisitions using ordering procedures (FAR Part 16), and acquisition of services (FAR Part 37).
These changes to FAR 15.202-2(c) and (d) will significantly impact acquisition strategies for non-DoD agencies. We also anticipate a short-term rise in pre-award protests, as agency procurement officials work through understanding the impact of these changes. For pre-award protests, offerors should be on the lookout for evidence in a solicitation suggesting that an agency failed to properly consider the criteria at FAR 15.202-2(c) or the strong preference against LPTA procedures for the categories of supplies and services set forth at FAR 15.202-2(d). For post-award protests, offerors should, as always, consider whether an agency’s evaluation, in fact, operates like an LPTA evaluation despite clear trade-off language in the solicitation, or vice versa.
For more questions regarding bid protests or rules concerning trade-offs and LPTA source selections, please contact a member of Taft’s Government Contracts team.
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