Chapter 3 LOWEST PRICE, TECHNICALLY ACCEPTABLE VS. TRADE-OFF

Both lowest price, technically acceptable (LPTA) and trade-off source selections require the consideration of at least one other proposal evaluation factor in addition to price or cost and may use any number of these evaluation factors. The non-cost evaluation factors are sometimes referred to as merit factors or technical factors. Each non-cost evaluation factor, in turn, may have any number of subfactors or may have no subfactors at all.

LOWEST PRICE, TECHNICALLY ACCEPTABLE

In an LPTA selection, offerors must be found acceptable with regard to all cited merit evaluation factors to be considered for award. Award is then made to the acceptable offeror with the lowest price or cost provided that the price or cost has been determined to be fair and reasonable. Some refer to LPTA merit evaluation factors as go/no go or pass/fail factors. When a source selection is to be made, a competing contractor that remains unacceptable on even a single evaluation factor is not eligible to receive a contract award.

TRADE-OFF

In a trade-off procurement, contractors are scored or rated with regard to the merit factors, which are sometimes called variable factors. For example, one or more contractors may be given a rating of “acceptable” while others might be found “outstanding” or even “marginal” or “unacceptable.” In trade-off selections, a contract award may be made to a competing contractor offering other than the lowest price or cost, provided that the source selection authority (SSA) deems the increase in quality, decrease in performance risk, or both to be worth the additional money.

Trade-off procurements are akin to the purchasing we do in our private lives. We look at the differences in quality (as we perceive it) between canned soup options and then decide whether it is worth the extra 30 cents to buy Campbell’s soup rather than the store brand.

If a source selection combines both go/no go factors and variable factors, it is considered to be a trade-off source selection. This is so even if only one of several evaluation factors is variable (comparatively scored).

A PRACTICAL EXAMPLE

To demonstrate how these two source selection approaches can result in significantly different outcomes, consider the following hypothetical situation.

A fictional LPTA procurement has three evaluation factors:

1. Contractor technical approach

2. Key personnel

3. Price/cost.

Contractors A, B, and C have all submitted proposals. The offer from A has been judged to be unacceptable. Contractor B has a great technical approach and top-of-the-line personnel. Contractor C has an acceptable but less attractive approach and personnel who just meet government standards. Award will be made without holding discussions.

Prices offered are as follows:

A. $1 million

B. $2 million

C. $1.98 million.

Contractor A cannot get the award because the proposal is not acceptable.

Contractor B cannot get the award because it did not have the lowest price among acceptable proposals.

Contractor C is given the award.

Under LPTA the government must select the lowest price offered among “acceptable” proposals. This is so even where the difference in price is miniscule.

In a trade-off procurement, especially one where the government has made merit factors more important than cost or price, the government could have selected contractor B, which in this case may actually offer the real “best value.”

ADVANTAGES AND DISADVANTAGES OF LPTA

The LPTA method has these advantages and disadvantages:

• Evaluation factors must be established, but they are not assigned relative importance. Each factor is equally as important as any other. This makes preparation of a source selection plan less complex and less time consuming than would be the case if trade-off were used.

• Evaluation of proposals is not normally as difficult as it would be in a trade-off process, since it is not necessary to score or rate competing contractors. Contractors are judged to be either “acceptable” or “not acceptable” on the evaluation factors. Documentation of the bases for these judgments is made a part of the contract file.

• Since award is made to the lowest price or cost among acceptable proposals, the award is relatively easy to document and relatively easy to defend in the event of a contractor protest that challenges the choice made by the government.

• The strong emphasis on low cost or price is believed to encourage competing contractors to “sharpen their pencils” and may well result in prices that are lower than would have been obtained if the trade-off process had been used.

• Of the two source selection processes, LPTA is usually less labor intensive for the government and usually takes less time.

• The government may have to select less than the true best value when LPTA is used. In fact, as stated previously, the government may have to select the worst acceptable proposal.

Considering all the advantages to the government, including lower administrative cost and less consumption of time, government planners can reasonably conclude that using LPTA will result in the overall best value to the government for a specific procurement. This may be especially so when acquisition planners anticipate that there will be minimal quality or risk discriminators between likely competitors.

ADVANTAGES AND DISADVANTAGES OF TRADE-OFF

The trade-off method has these advantages and disadvantages:

• Evaluation factors must be established, and the relative importance of those factors must be determined. This normally consumes more planning time than the LPTA process. Factor selection and weighting must be carefully done because the government will ultimately have to make business judgments that are “not inconsistent” with the proposal evaluation factors and their relative importance, as set forth in the government solicitation.

• Proposal evaluators must score or rate each competing contractor on each evaluation factor and prepare supporting rationale. Again, this is more labor intensive than LPTA.

• Trade-off is a relatively subjective process wherein the SSA is given great latitude in choosing a contractor. He or she is expected to exercise good business judgment and to clearly and persuasively document the rationale for award. The SSA thus must assume a great deal of responsibility. The law provides only that he or she is required to make a rational decision that is consistent with the evaluation scheme set forth in the request for proposals.

• Because individual business judgment is exercised in the award, and because the evaluation process is more complex, there is more opportunity for error, disagreement, and contractor protest when using trade-off.

• The trade-off process almost always takes more time than an LPTA selection.

• Trade-off increases the likelihood of obtaining the true best value among competing proposals since it gives the government (the appointed SSA) far more flexibility in applying business judgment.

Notwithstanding any disadvantages inherent in the trade-off process, acquisition officials may reasonably conclude that for a particular procurement, the amount of money involved, the inherent contract performance risk, and/or its criticality warrants using this traditional method of obtaining best value. Trade-off permits the application of reasoned business judgment, rather than selecting a winning contractor by calculator.

AGENCY GUIDANCE

Some published agency guidance may encourage or require the use of one or the other of these processes for particular categories of procurements. For example, agencies often strongly encourage the use of the trade-off process in research and development procurements and in major systems acquisitions.