The Department of Defense's (DoD) long-awaited final rule restricting the use of lowest price technically acceptable (LPTA) source selection procedures became effective October 1, 2019, resulting in several updates to the Defense Federal Acquisition Regulation Supplement (DFARS). The DFARS now requires contracting officers to document their analysis of seven criteria before utilizing LPTA procedures in most procurements, including when placing orders against multiple award indefinite delivery contracts and under Federal Supply Schedules. Though the impact of these new restrictions remains to be seen, it seems likely that they will lead to an increase in bid protests challenging LPTA solicitations and contract awards.

Background

The Federal Acquisition Regulation (FAR) identifies two principal source-selection procedures: (1) the tradeoff process; and (2) the LPTA process. The tradeoff process requires an agency to analyze tradeoffs between both cost and non-cost evaluation criteria to determine the best value offeror, allowing for award to a technically superior offeror at a higher cost. In contrast, the LPTA process does not consider technical superiority but necessarily predetermines that the lowest cost, technically acceptable proposal is the best value. 

LPTA procedures have fallen in and out of favor over time. Data suggests that DoD increased its use of LPTA procedures over the past decade in parallel with the Department's multiyear Better Buying Power initiative to increase efficiency and reduce acquisition costs. More recently, however, DoD has faced criticism for relying too heavily on LPTA procedures in acquisitions where a tradeoff approach was more appropriate (e.g., procurements that require innovative technical solutions or that directly impact safety or security). As a result, Congress included limitations on the use of LPTA procedures in both the Fiscal Year (FY) 2017 and FY 2018 National Defense Authorization Acts (NDAA),¹ leading to the new final rule. 

The New DFARS Rule

The new DFARS rule imposes stricter limitations on DoD agencies' ability to use the LPTA process and requires written analysis of the following criteria to justify an LPTA approach: 

1. Minimum requirements can be described clearly and comprehensively and expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
2. No, or minimal, value will be realized from a proposal that exceeds the minimum technical or performance requirements;
3. The proposed technical approaches 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; 
4. The source selection authority 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;
5. No, or minimal, additional innovation or future technological advantage will be realized by using a different source selection process;
6. Goods to be procured are predominantly expendable in nature, are non-technical, or have a short life expectancy or short shelf life; and
7. A determination that the lowest price reflects full life-cycle costs.² 

The Rule's Impact

The new DFARS limitations on LPTA procedures may prove challenging for government procurement officials to implement in practice and thereby lead to an increase in bid protest activity. The Government Accountability Office (GAO) interviewed DoD contracting officials who had recently awarded LPTA contracts for a November 2018 report to Congress. Several officials said they "generally considered" most of the criteria now required by the final rule when deciding whether to use LPTA procedures—but a number expressed uncertainty about how to apply certain criteria. Contracting officials specifically expressed confusion about how to implement two of the new criteria: (1) whether goods are predominantly expendable in nature, are nontechnical, or have a short life expectancy or short shelf life; and (2) whether the lowest price will reflect full life-cycle costs for the goods or services. As to the first criteria, contracting officials noted that there may not always be any clear standard or metric to measure "short life expectancy" or a "short shelf life"—e.g., is five years a short shelf life for a general-use computer? They similarly expressed concern that the concept of "life-cycle costs" may not apply neatly to all procurements—e.g., what are the life-cycle costs of construction quality assurance services, teaching services, or products such as natural gas and de-icing agents?³

Takeaways

The November 2018 GAO report provides valuable insights for contractors that may be debating whether, when, or how to challenge an LPTA solicitation or a resulting award decision. At a minimum, contractors should consider the following questions when determining whether a solicitation or an award may be vulnerable to a successful pre-award or post-award protest:

1. Pre-Award: Is an LPTA Solicitation Properly Justified? 

When a DoD acquisition is structured using LPTA procedures, offerors should carefully review the solicitation for signs that the agency may not have properly considered or applied the DFARS criteria. Similarly, contractors should look for information which may reveal that an ostensible tradeoff evaluation scheme is really a well-disguised LPTA approach. The GAO data suggests this could be fertile ground for pre-award bid protests challenging the terms of LPTA solicitations, particularly since: (1) DoD components are now required to formally document their rationale for utilizing LPTA procedures; and (2) some of the DFARS criteria may not yet be well-understood by contracting officials. 

2. Post-Award: Was the Agency's Best-Value Tradeoff Analysis Really an LPTA Analysis?

Disappointed bidders also should remain vigilant in best-value tradeoff procurements in which an agency evaluates offerors' proposals as though the solicitation were structured as an LPTA procurement. This could arise, for example, in procurements where an agency purports to conduct a tradeoff analysis under a traditional best-value scheme but awards to a lower-priced offeror with lower technical ratings without conducting an adequate tradeoff analysis. This situation will continue to give rise to viable post-award protests and maybe become more prevalent given the strong policy preference against using LPTA methods now expressed in the DFARS. See, e.g., Patriot Solutions, LLC, 2016 CPD ¶ 376 (Dec. 22, 2016) (protest sustained where agency improperly converted the best-value tradeoff competition to a LPTA by failing to conduct a sufficient best-value tradeoff analysis).

We will continue to monitor the effect of the new DFARS restrictions, as well as the proposed similar restrictions on LPTA source selection procedures for civilian agencies. 

For more information, please contact:

Jason N. Workmaster, jworkmaster@milchev.com, 202-626-5893

Alejandro L. Sarria, asarria@milchev.com, 202-626-5822

Elizabeth J. Jonas*

Abigail T. Stokes*

*Former Miller & Chevalier attorney

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¹The FY 2019 NDAA included similar restrictions on civilian agencies' use of LPTA source selection procedures. A proposed rule to implement those restrictions was published on October 2, 2019.
²DFARS 215.101-2-70(a)(1). The new regulation also includes strong preferences against LPTAs for certain safety-related products and knowledge-based services, as well as explicit prohibitions where safety-related products' quality or failure could result in combat casualties and for certain major defense development programs and contracts for audit services. Id. 215.101-2-70(a)(2), (b)(1)–(b)(3).
³The DoD Office of the Under Secretary of Defense issued a DFARS Procedures, Guidance, and Information (PGI) that purported to clarify these subjects for DoD acquisition professionals but only refers contracting professionals to their requiring activities without providing any meaningful guidance.

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