“Lowest Price, Technically Acceptable (LPTA)” is a US government purchasing strategy that has leaked its way into where it doesn’t belong; buying complex services and/or products in the private sector. And like toxic waste, it’s difficult to avoid contamination once it spreads.
First, LPTA has its place: It’s meant to get the US government best value for its buys. In a bid process buyers set out minimum hurdles for technical requirements, and once bidders clear them, their offers are ranked solely on price; and lowest price wins.
Beware of Stepping in a Swamp
LPTA is intended for a narrow use only, where “the risk of unsuccessful contract performance is minimal.” And this is where LPTA’s toxicity comes in; when buyers use it to purchase critical, complex services/products, like contract security services for example.
Imagine if a lowest-price security contractor failed to keep terrorists out of a secure government facility, or allowed criminals to walk off with government weapons; where’s the best value there?
So, using the wrong purchasing strategy (LPTA or another) is a swamp unto itself. The US Department of Defense (DOD) is seeking to drain that swamp with its Better Buying Power initiatives, now up to 3.0 guidance.
And, as toxic as LPTA may be in government purchasing, it’s the leakage into private sector buying that pollutes the larger procurement environment.
When, private sector firms (often prime contractors to the US government) use LPTA to buy critical, complex services/products, they too become contaminated. Those purchases can miss an entire range of value, value their shareholders expect procurement to deliver, such as;
- Innovation – investment & long-term vision from contractors who invest above LPTA opportunities
- Technology – enterprise-wide deployment of technologies for productivity & efficiency in addition to launching innovative new ones
- Experiential Insights – gained from working with industry-leading customers rather than ones using LPTA as a purchasing strategy
- Reliability & Redundancy – investments & expertise highly valued in critical business situations
The Doritos of the Procurement World
Don’t be surprised by private sector procurement being drawn to LPTA’s use.
LPTA, like flavor chemicals in snack foods, has an alluring, almost compulsive attraction. Think about it:
- LPTA is used by the US government – so it must be legitimate
- LPTA sets minimum thresholds for technical requirements – so it’s relatively easy to write RFx & evaluate bidders’ technical responses
- LPTA uses price as the sole determinant of the winner among technically “qualified” bidders – no doubt about the numbers, no award protests, no blame to buyers
Cleaning Up LPTA’s misuse in Private Sector Purchasing
As with any toxic cleanup, getting LPTA out of its private sector misuse may not be simple or easy. Here are three possible approaches.
Close the Stable Door AFTER the Horse has Bolted
If you must participate (incumbent contractor?) in an LPTA opportunity – do so with eyes skeptically open, which means:
- SUBMIT your responses to clear the technical requirements’ hurdle but don’t kill yourself doing so – skip the investment in technical proposal writers if possible (Heresy to my consultant’s ears but a legitimate option in LPTA bids)
- SHARPEN job costing and pricing models for lowest price in the prescribed RFP model
- THROW ‘EM A SNOWBALL IN JULY by submitting an additional, different pricing model or creative payment program that lowers their Total Cost of Ownership (TCO), at least initially. This may have little chance of succeeding and is dependent upon the RFP allowing alternatives – but if you don’t have the lowest price there’s not much hope
Close the Stable Door BEFORE the Horse Bolts
When presented a chance to bid an LPTA opportunity – don’t. Skip it.
Include LPTA in your bid/no-bid matrix as a factor not to bid. Then follow your own advice and don’t go there.
Getting the Horse Not to Bolt
Educate and raise awareness among procurement departments. Yes, this is the long-term view. And if large, critical, complex sales (purchasing) are important to you, why wouldn’t you work towards it over the long-term?
- If you’re a contractor, hold Lunch and Learn seminars where your guest speakers address failures, nuances, and success stories of purchasing strategies. Have them focus their talk on selecting the most appropriate buying methodology, which should be the one you, as a contractor, compete in. Consider guest speakers from the DOD acquisition workforce that are well versed in, and proponents of BPP 3.0.
- Submit and/or pay for placement of research articles/posts on Lessons Learned where LPTA failed miserably, and what would have been a more appropriate purchasing strategy.
- Participate in LinkedIn discussion groups for procurement and attend industry association panels. Educate yourself about the selection of the appropriate contract type, which determines the purchasing strategy and whether as a contractor you choose to participate.
- Meet one-on-one with procurement individuals in your customers’ firms; hopefully long before source selection. Seek to discuss their approach to selecting contract type and purchasing strategy. However, it’s unlikely they’ll see you if that’s your stated reason for the meeting. You may have more luck saying you want to discuss vendor pre-qualification, compliance, and performance value assessment. Those are legitimate reasons procurement professionals may give you a meeting.
Hope for the Future
Awareness and education are the hope for the right purchasing strategy being used. Contractors know when it’s the wrong strategy but have little ability to influence the choice of strategies once the game has started. It will take time and effort from both purchasers and contractors to clean up the toxic LPTA swamp.
THIS ARTICLE was first published on January 20, 2017 by Chris Arlen on LinkedIn