In a recent breakfast hosted by the Coalition for Government Procurement, Office of Federal Procurement Policy Administrator Joe Jordan effectively punted on the notion of best value versus the realities of federal procurement; lowest priced offers win contracts.
…Generally speaking, he said industry likes best-value procurements. They allow companies to propose higher prices, since officials will consider other evaluation criteria beyond price. On the other hand, the government is pushing low price and not always fully analyzing the entire lifecycle of a project, Jordan said. Both sides have good arguments, so the contracting officer’s judgment is the final arbiter….
Due to the intense focus on budget cuts, and sequestration still casting a very ominous shadow on the federal government, price has become the most important factor in any source selection, and will remain so for the foreseeable future.
Any talks of best value are out the window, so agencies should state as such in their solicitations. The issue really is about how do determine technical acceptability, given the foundations of what are normally poorly defined requirements.
Firstly, requirements for proper use of Lowest Price, Technically Acceptable (LPTA) should be very standardized, commodity based purchases that require no other factors other than price. That means just the commodity itself through very rigid, specific, and accurate requirements. No opportunities for customer service, shipping, transport, customization, etc. These requirements require the use of best value, and the ability to offer better service.
You get what you pay for. There lies the rub.
Often times, the government simply does not know what it wants. It thinks it does, so it puts horribly written Requests for Proposal on the street, that result in dozens and dozens of questions, since the requirements are either redundant, confusing, circular logic, not achievable, unrealistic, boilerplate and not applicable, etc. Further exacerbating the problem is the lack of engagement with industry during the pre-acquisition phase, assuring poor requirements. Lack of leadership, poor capabilities, and the excuse of lack of time are the usual suspects.
The pressures to save money are overwhelming, so prices are driven downward to unrealistic levels. Is anyone still doing cost realism assessments? You know the answer.
How often does the Government Accountability Office sustain a protest where the losing offeror, and often an incumbent, claims they lost to a competitor who underbid them by 40%, even though the incumbent knows exactly what the real cost of doing, at a satisfactory level, entails?
This vicious circle ensures performance will fail, and it is the lack of a long-term focus that is troublesome. Poor leadership, combined with continued declines in the skills and capabilities of the acquisition workforce (I include PMs in that bunch) have created a perfect storm of continued poor performance and waste. Just look at the fiasco that is the System for Award Management (SAM) for a perfect example of this.
The General Services Administration can claim SAM was best value, but price is kingmaker. “Buying In” is seen as an improper business practice per Federal Acquisition Regulation 3.501, but it seems to be standardized now.
Investment analysis is a foreign concept, since saving a few bucks today will lead to inevitable rise in costs tomorrow, failed programs, and poor performance.
Awarding to the lowest bidder is a disaster waiting to happen. Only when innovation is desired, through the use of performance-based contracting, combined with properly written requirements and effective contract management and execution, can best value be realized.
That is the best outcome for the taxpayer. Easier said than done.