Is “Lowest Price, Technically Acceptable” really the best way?

The government has embraced the idea of “Lowest Price, Technically Acceptable” (LPTA) for procurement. The idea behind the phrase is simply this; when the government procures whatever it may need, they will look at the lowest price first and then continue to work their way up the price ladder until a technically acceptable option is achieved. Theoretically, this gives the government the lowest possible price for the best level of quality for products or services that they need.

According to Deltek, between fiscal year 2009-2014 the use of LPTA for purchasing grew 55% in civilian agencies and 24% within the DoD, so we know that the government is utilizing this option more and more. What kind of pressure does that put on vendors’ bottom line who are constantly competing for the government business? For example, if a service company is bidding on and wins a LPTA bid, the first cuts they typically make to meet their bidding price are salaries and benefits for those working on the project. With service companies’ margins getting tighter and tighter, some are deciding to exit the federal market altogether.

However, LPTA might potentially be on its way out as the main purchasing format due to the extra cost of restructuring contracts if services are not up to par at the low price that was accepted. Those kinds of changes cost the US government time and money, making it more frugal to start off with a slightly higher price in exchange for much better quality and technical acceptability.

It’s also important to note that total federal dollars spent on contracting is actually dropping. In 2008, total contracts awarded was at $541.3 billion, falling to $445.4 billion in fiscal 2014 and ending up (year to date FY 2015, which ends on October 1) at only $329 billion (USAspending.gov). Unfortunately, these figures don’t tell whether the government is really buying everything cheaper utilizing LPTA or just buying less.

In both products and services areas, contractors coming up against LPTA should focus on their technical acceptability and quality as factor number one of proposals. Your technical capabilities are what make your company unique and what really make you stand out. Once the government reaches the “Technically acceptable level, they will look for the highest return at that price point. Also, doing pricing research on your main government competitors and seeing where your pricing falls is quite important. Putting those two pieces of information together will put you on the path to conquering the LPTA proposal with success.

What should you plan on for the new fiscal year?

Federal Agencies put together their budget at the end of each fiscal year for the next year. Once that budget is approved, it becomes their forecasting report. Forecasting reports differ slightly from agency to agency.  In general they are the list of goods and services that the agency will be spending their budget on throughout the year. Vendors can use these reports to get an idea which agencies have money allocated to their goods or services for the upcoming fiscal year.

So how do you go about forecasting for your company? First of all, we would suggest knowing which agencies you want to target. This can be done by looking at what agencies spent the most in your industry in previous years. USA Spending is a great resource for that information, USASpending.gov. Once you have your target list, you can begin looking at forecasting reports for those agencies. Most agencies have a page on their website dedicated to procurement. The Environmental Protection Agency’s page is a good example: EPA Procurement Forecasting Database.

Some agencies forecasting reports can be very general in the type of information they provide, whereas other are very detailed. Generally we can tell what they are forecasting (goods or services) and when they are looking at purchasing it. Some tell you how they plan on purchasing it (open competition, DoD EMall, GSA Schedule, etc.), who the technical point of contact is, the estimated value of the contract, etc.

Once you have your list of opportunities from your targeted agencies, what do you do with this information? First, we want to rank them by priority. Typically the opportunities that will be posted the soonest take first priority. We then recommend reaching out the point of contact. Whether it is the technical point of contact or the general purchasing point of contact found on the procurement page for that agency and begin a dialogue about that specific opportunity. 

When starting the dialogue you want to focus on two things, one being building a relationship with the potential buyer and the other being gathering information about the specific opportunity. The most important question to ask when inquiring about an opportunity is if there is an incumbent, if there is they should give you the name of the company. You also want to know if they are happy with them and what areas they are looking to improve. Some buyers are willing to share this with you while others are not so be prepared for a no when you ask. If there is not an incumbent than you want to find out if they plan on releasing a sources sought or RFI prior to the solicitation or if the statement of work has already been prepared. If the statement of work has not been prepared or finalized yet this means that you have a chance to offer up your industry knowledge and expertise to the buyer.

There are many different questions you can ask depending on the opportunity and the agency you are dealing with. Keep in mind the questions you ask when looking at a current solicitation and begin to ask those of the forecasted opportunities. Using forecasting reports as one tool in your government marketplace arsenal will give you the chance to be a more successful contractor. 

Temporary Freeze on Awards of MOBIS (Schedule 874) Contracts

Due to the transition of all MOBIS Contracts to the new Professional Services Schedule, 00CORP, the General Services Administration is putting a freeze on awarding new contracts. Orders have come down from the GSA Regions 10 office in Seattle, who are the Mangers for the MOBIS Contracts.

The GSA has starting informing contractors that have submitted their information for this contract that effective immediately no awards will be made pending the October 2015 transition. There is a silver lining to the situation however, once awards begin being made to those pending they will receive the new Professional Services Schedule Contract. This opens a huge door for those companies, you’re not limited by the scope of the MOBIS contract.

To take a look at what SINs are included under Professional Services you can take a look at GSA’s eLibrary here: http://www.gsaelibrary.gsa.gov/ElibMain/scheduleSummary.do;jsessionid=4AC8018C72E9A8CDF3E4BBF0B84321EB.prd2pweb

Keep in mind that adding any of these new categories will have to wait until you’re officially awarded your GSA Contract.

As always, if you have any questions feel free to give us a call!

Government Cyber-Safety at Risk

The government seems to be consistently behind the curve of Information Technology purchasing. Is that because they are slow to adopt or do they have other difficulties in acquiring the newest and the best?

Being so far behind the curve of IT purchasing not only wastes taxpayers money, it also leaves the government extremely vulnerable to cyber-attacks. Earlier this year, millions of current and former federal workers’ data was stolen from the Office of Personnel Management. Prior to that attack, security clearance information was stolen from the same office. Software used by the government, sometimes even including infrastructure, is not able to repel determined cyber-attacks and hacks.

All these problems result from the government’s old and difficult ways of purchasing. The best and brightest of the information technology world, centered in Silicon Valley, are not open to working with the government due to purchasing methods that are old and outdated. Some government agencies will not even consider purchasing a product that has not been on the market for at least 2 years. With how quickly technology moves, this leaves the government vulnerable and open to attack.

Around June of 2015, the United States Navy signed a $9 million dollar contract to continue providing security patches for the Windows XP operating system, which had an original release date of October of 2001. Microsoft stopped support for the system in April 2014, but the US government is paying $9 million dollars to continue the support of the system. Reason being? The latest operating system, which is more secure for the government to use, has not been on the market long enough, according to government procurement rules, to be considered.

Looking forward, The National Defense Authorization Act for fiscal year 2016 is being debated in Congress at this time and within it are acquisition reform provisions; including  some procurement rules that could potential be repealed. At the top of that list is easing restrictions on Information Technology Purchases, which will entice startups and the “best and brightest” of Silicon Valley to help the government upgrade to better and, more importantly, safer hardware and software.

Sources:

http://www.nytimes.com/2015/07/10/us/office-of-personnel-management-hackers-got-data-of-millions.html?_r=0

https://www.congress.gov/bill/114th-congress/house-bill/1735?q=%7B%22search%22%3A%5B%22%5C%22hr1735%5C%22%22%5D%7D&resultIndex=1

http://fortune.com/2015/06/24/navy-microsoft-windows-xp/