Lowest Price Technically Acceptable – What does it mean for my business?

By Terry Stroud, SBTDC/PTAC Counselor at Fayetteville State University

It seems we are seeing the term “lowest price technically acceptable” (LPTA) more each day. The use of LPTA remains high as the government seeks the lowest price for needed supplies and services in the face of tight budgets and the depletion of funds. Successful LPTA proposals require a different approach than source selection processes that place less emphasis on the bottom line. What does this mean for my business going forward? Again, it relates to the bottom line — costs.

I seem to have this conversation with virtually every business client these days. As we have the discussion, we inevitably end up talking about getting back to the basics of business.

Here are the parameters of LPTA from the Federal Acquisition Regulation (FAR):

15.101-2 Lowest price technically acceptable source selection process.

(a) The lowest price technically acceptable source selection process is appropriate when best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price.

(b) When using the lowest price technically acceptable process, the following apply:

(1) The evaluation factors and significant subfactors that establish the requirements of acceptability shall be set forth in the solicitation. Solicitations shall specify that award will be made on the basis of the lowest evaluated price of proposals meeting or exceeding the acceptability standards for non-cost factors. If the contracting officer documents the file pursuant to 15.304(c)(3)(iii), past performance need not be an evaluation factor in lowest price technically acceptable source selections. If the contracting officer elects to consider past performance as an evaluation factor, it shall be evaluated in accordance with 15.305. However, the comparative assessment in 15.305(a)(2)(i) does not apply. If the contracting officer determines that a small business’ past performance is not acceptable, the matter shall be referred to the Small Business Administration for a Certificate of Competency determination, in accordance with the procedures contained in Subpart 19.6 and 15 U.S.C. 637(b)(7)).

(2) Tradeoffs are not permitted.

(3) Proposals are evaluated for acceptability but not ranked using the non-cost/price factors.

(4) Exchanges may occur (see 15.306).

One must be vigilant in adhering to the parameters of LPTA as the proposal is developed. It demands that careful attention is given to Section M and your Proposal Strategy. A few items to keep in mind when developing your proposal must include:

  • LPTA proposals are evaluated for acceptability, but competing LPTA proposals are not evaluated using non-cost factors.
  • Section M must include evaluation factors and significant subfactors for purposes of determining whether a proposal is acceptable, but such non-cost factors serve no further purpose.
  • Non-cost factors can, but are not required to, include past performance. However, even when included as an evaluation factor, past performance may only be used to determine whether an individual proposal is acceptable, not to compare the past performance of the offerors.

This leaves price as the true discriminating factor for LPTA. This could even be considered as an advantage for those companies that have limited past performance. So the question now becomes “how do I get my pricing to the point, assuming the rest of my proposal is ‘responsive’, that I am the lowest bidder and win the contract?”

“How do I get my pricing to the point, assuming the rest of my proposal is ‘responsive’, that I am the lowest bidder and win the contract?”

How efficient is your company, compared to your competition? This will directly affect your ability to compete in the federal contracting arena. LPTA dictates that your company is efficient in order to win the contract. Some of the areas we typically discuss when looking at improving efficiency and pricing involve a financial analysis of the company and operations, access to capital, leadership and employee performance, which segments of government contracting am I most competitive in, and Strategy Development and Implementation. So many factors have an effect, and each company is unique.

The SBTDC/PTAC has a wide range of services and expertise to assist you in these matters. The financial health of your company is one of the most important factors that will allow you to be successful in Government Contracting. All of the issues are important, but this one directly affects, not only the size of the contracts that you can bid on, but also, how competitive your bids are. If you are working primarily off of a credit line, is your bid going to be lower than another company who is working primarily off of cash working capital? The answer is, probably not, unless you are willing to quote a very low margin. Every company is different. This may not be the issue for your company. However, periodically taking a look at your company, performing a routine business tune up, will go a long way towards keeping you competitive.

To assist you in a business tune up, the SBTDC/PTAC counselors will work with you as a team to help you address all of the important aspects of your business, helping you to become more efficient and successful. I urge you to review our website at http://www.sbtdc.org/ where you can get a good overview of the general business and specialty assistance available to your business. I urge you to review our website at http://www.sbtdc.org/programs/ptac/ where you can get a good overview of PTAC services available to your business.

If you are already a client of the SBTDC/PTAC, but have not worked with us recently, it is time to reconnect. If you are not already a client, follow this link, http://www.sbtdc.org/erfc/ to become a client.

To compete in today’s Government Contracting climate of LPTA, it is critical for your business to get back to the basics. Any improvements to the efficiency of your company, even if you do not see a dramatic increase in the number of Government Contracts won, will at least show up on the bottom line as increased profit. There are no drawbacks to a periodic business tune up. To win LPTA contracts consistently, it’s all about cost. Contact us today, and we will be more than happy to assist you.

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