https://crsreports.congress.gov
Updated December 15, 2021
Defense Primer: Lowest Price Technically Acceptable Contracts
Background
When procuring goods or services, the Department of
Defense (DOD) generally seeks to obtain the best value for
the government by encouraging full and open competition,
as required by the 1984 Competition in Contracting Act
(P.L. 98-369, also known as CICA). Full and open
competition occurs when all eligible prospective contractors
are permitted to submit bids or proposals in response to a
proposed contract action.
Getting the Best Value for DOD
CICA generally mandates that, whenever practical, DOD
must obtain full and open competition through the use of
competitive contracting procedures. Part 15.101 of the
Federal Acquisition Regulation (FAR) establishes two
primary types of competitive source selection procedures
intended to obtain the best overall value for DOD: (1) the
tradeoff process and (2) the lowest price technically
acceptable (LPTA) process. The tradeoff process is
generally used when cost is only one factor to be considered
in awarding a contract. For example, DOD may award
contracts based on non-cost factors such as quality and
performance; a firm’s technical or managerial expertise; or
past performance. Each of these criteria may be evaluated
on a sliding or pass/fail basis. The use of LPTA is
appropriate when price is the determining factor in
awarding a contract. Under LPTA, for all proposals deemed
to be technically acceptable and therefore meeting DOD’s
specified minimum performance requirements, price is the
determining factor in awarding a contract, with no
consideration given to any other factors. Past performance
does not need to be an evaluation factor when it is not
relevant for the particular acquisition.
In recent years, DOD has faced criticism for using LPTA
instead of a tradeoff process in certain acquisitions.
Congress has expressed concern regarding the perceived
inappropriate use of LPTA and has passed legislation
limiting DOD’s use of LPTA.
Benefits to Using LPTA
A number of analysts have identified specific benefits that
LPTA may provide DOD, including potential cost benefits,
accelerated acquisition time frames, and fewer bid protests.
Cost Benefits
Under LPTA, all factors other than price are evaluated on
an acceptable or unacceptable basis without consideration
given to higher levels of quality. Observers note that, in
circumstances where there is no appreciable benefit to DOD
for exceeding its stated minimum technical requirements,
the use of LPTA can potentially result in savings.
Accelerated Time Frames
In certain circumstances, LPTA may offer a more
streamlined and simplified approach to procuring certain
goods and services. Firms bidding for a contract know the
specific thresholds and can sometimes submit proposals
more quickly. Award decisions require little subjective
analysis, potentially accelerating decision-making.
Fewer Bid Protests
Contracts awarded on the basis of lowest price are
considered easier to defend against bid protests. In 2015,
then Under Secretary of Defense for Acquisition,
Technology, and Logistics Frank Kendall acknowledged
this benefit, stating that “objective source-selection criteria
are harder to contest successfully.” However, he cautioned
that source-selection criteria and acquisition strategies
should not be designed around limiting the likelihood of bid
protests.
When is LPTA Appropriate?
LPTA is considered best suited for situations in which
contract requirements are well defined, simple, or reoccurring;
there is a low risk for poor performance;
there is little development work to be completed; and
there is no appreciable value to DOD for performance
exceeding the technical requirements.
As such, LPTA is more likely to be effective when contract
requirements are clearly and comprehensively spelled out.
Recent changes to statute and regulation have set forth
specific requirements for the use of LPTA, as well as
circumstances where DOD should generally avoid the use
of LPTA. Section 813 of the FY2017 National Defense
Authorization Act (NDAA) (as amended; see 10 U.S.C.
§2305 note) mandates that DOD can only use LPTA if the
following conditions are met:
minimum contract requirements in terms of performance
objectives, measures, and standards are clearly identified;
there is little or no value in exceeding the minimum technical
or performance requirements set forth in the proposal request;
there is little or no subjective evaluation as to the desirability
of one proposal versus another;
there is a high degree of confidence that a review of technical
proposals other than the lowest bidder would not result in the
identification of factors that could provide value or benefit to
DOD;
little or no additional innovation or future technological
advantage will be achieved by using a different source
selection process;
any goods being obtained are generally expendable in nature,
are nontechnical, or have a short life expectancy or shelf life;
