Value Adjusted Total Evaluated Price (VATEP)

Early this April the Defense Procurement and Acquisition Policy Office of the Under Secretary of Defense for Acquisition, Technology and Logistics issued new source selection procedures (SSP) which replaced the previous policies issued in 2011. These new policies bring forth some changes that will have a significant impact on how DoD conducts proposal evaluation. However the change of greatest magnitude is that highlighted in Appendix B of the new SSP. Up till now the two best value source selection methods have been: Lowest Price technically acceptable or LPTA and Tradeoff Process. The SSP introduces a new selection method called Value Adjusted Total Evaluated Price (VATEP).

“The VATEP technique monetizes different levels of performance that may correspond to the traditional requirements process of defining both threshold (minimum) and objective (maximum) performance and capabilities. It identifies in the RFP the percentage price increase (or dollar amount) the Government is willing to pay for measureable levels of performance between threshold (minimum) and objective (maximum) criteria (e.g., Probability of Hit, specific operational ranges, etc.). “

Basically VATEP source selection approach allows offerors to make an informed decision on whether they should simply meet the threshold requirements or exceed them.

VATEP provides the industry with greater certainty regarding proposed enhancements and it will take the subjectivity out of the best value tradeoff process by creating an objective value for offered enhancements. Simply put, VATEP links value and cost in a way that is quantifiable.

VATEP establishes a two-step process to reach the best value decision:

Step one: competitive range is established by determining if the offeror meets the minimum requirements in the solicitation. If the offeror does not meet minimum requirements, they are eliminated from the competition.

Step two: determines if the offeror’s proposal contains enhancements that meet “above threshold criteria”. If the proposal contains one of these valued requirements, the agency will adjust the offeror’s total proposed price (TPP) by an amount set forth in the solicitation to determine the offeror’s total evaluated price (TEP).

Example: Government issues a solicitation and through the evaluating instruction to offeres it explains that they (the government) will be using a VATEP method to evaluate the proposals. Further through the solicitation the Government instructs that an offeror’s price will be reduced by up to $20 for proposing to achieve delivery within 10 days rather than the minimum 15 day threshhold. Based on the VATEP method, during Step 2 of the source selection process, the Source Selection Team (SST) adjusts each offerors Total Proposed Price to derive the Total Evaluated Price (TEP) by subtracting up to $20 for the valued requirement the proposal is deemed to satisfy. The adjustment is for evaluation purposes only and does not affect the offeror’s proposed pricing. If the offeror is successful, the contract will be awarded at the prices proposed. If an offeror does not propose to meet any of the valued requirements, the Total Proposed Price (TPP) for that offer is unchanged.

In this example, three proposals are received as follows:

  • Offeror A proposes a total price of $1,000 for 10 day delivery;
  • Offeror B proposes a total price of $990 for a 15 day delivery, and
  • Offeror C proposes a total price of $950 to deliver in 16 days.

Offeror C is eliminated in Step 1 (because they did not meet minimum requirements). At the conclusion of Step 1, Offeror A has a higher TPP than Offeror B. However, in Step 2, the TPP for Offeror A is adjusted by subtracting $20 for proposing a compliant, technically acceptable solution to the single valued above (delivery time)-minimum performance criteria. Therefore, at the end of Step 2, Offeror A has a TEP of $980 and Offeror B has a TEP of $990. [NOTE: if the offeror proposes performance or a capability in excess of threshold (minimum) but less than objective (maximum) valued requirement, then only a portion of the specified amount would be subtracted from the offeror’s TPP. This would be explained in the RFP.] Offeror A is awarded the contract.

No matter how highly rated an offeror’s proposed enhancements may be, however, an offeror in a VATEP procurement may be ineligible for award if the offeror’s TEP exceeds an “affordability cap” that can be established in the solicitation. The cap is defined in the procedures as the maximum approved funding allocated for the acquisition. Thus, if the solicitation establishes a cap, an offeror may not be eligible for award even if its proposal contains enhancements that exceed the “valued requirements” if the reduction in the offeror’s TEP still exceeds the affordability cap.

The new version of the Source Selection Procedures also modifies evaluation methodologies (e.g., a new Small Business Rating Method is included), updates statutory and regulatory references, and includes best practices through peer reviews. For the complete DoD Source Selection Procedures 40 page document please follow this link: . Solicitations with a source selection plan that was approved before May 1, 2016 will continue to use the previous version of the Procedures.

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