Putting best value back into the trade-off acquisition process

By May 20, 2019Acquisition
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by Dr. B. Dean Angell

 The Federal Acquisition Regulation (FAR) requires —and supported activities want—“best value.”

Best value is a continuum with, at one end, lowest price technically acceptable (LPTA) and trade-off at the other end. For example, consider a requiring activity needs to purchase a radar system maintenance. An LPTA requirement will list the minimum specifications and qualifications. After review of all acceptable offers, the lowest price offeror to meet all specifications will be awarded the contract. A trade-off will also list the minimum specifications and qualifications, but will also have criteria that allows the agency to pay more for better specifications and qualifications. The acquisition strategy must determine if there can be added value (trade-off) or if meeting the minimum specifications (LPTA) is best.

Trade-off and LPTA are both contracting tools. Sometimes DOD goes too far in one direction, as it did with LPTA. The problem arose when people started using LPTA for more complex purchases or not setting the minimum technically acceptable requirements high enough. If the government does not clearly define what is acceptable, it may end up buying something that is not completely acceptable.

Because of the LPTA issues, Congress stepped in to guide the government to use the trade-off process instead in the National Defense Authorization Acts (NDAA) for FY17 and FY18. The NDAA guidance demonstrates that Congress believes a trade-off process often provides better value than an LPTA process.

WHY PAY MORE?

It may seem unwise to pay more for a service in an environment of austere budgets. The government uses a trade-off process to select the most advantageous offer, allowing for differentiation between the non-cost qualities, such as technical approach, past performance and small business utilization compared to the cost or price qualities of an offeror’s proposal. A trade-off, as opposed to an LPTA, encourages innovation and maximum flexibility, which, in turn, can enhance the product or service offered and drive a better value. A recent aviation maintenance services source selection for Fort Rucker, Alabama, used a trade-off instead of an LPTA process, providing an example of how the trade-off approach can produce a better contract and, in turn, a better product.

This contract is for the maintenance of almost 600 Army and Air Force training helicopters. All Army and Air Force helicopter pilots perform initial and advanced training on these aircraft. The command incorporated best practices from the Army, Air Force, the FY17 and FY 18 NDAAs, and conversations with industry, awarding a 10-year, $4.7 billion fixed-priced incentive (firm target), or FPIF, contract.

The trade-off approach produced the best value by the relative importance of a technical requirements plan, past performance, small business utilization and cost, compared with awarding the contract to the lowest-cost offeror meeting the standard. The trade-off process facilitated the negotiation of additional value with the government emphasizing technical innovation and performance over merely low price. The source selection provided a dollar value, or monetization, when possible, to create a standardized method to value strengths and innovation in an otherwise subjective process. All proposed strengths were added to the contract to ensure that the promised enhancements were contractually binding. This additional value would have been lost if the government had used an LPTA source selection because the lowest cost offeror that met the minimum requirements would have won. Instead, offerors suggested innovative processes and products to create efficiency and increase the number of available flight hours, which, in turn, could produce more trained pilots.

LET’S COMPARE

LPTA is the essence of garnering efficiency and effectiveness in meeting a minimum standard; it is easy to choose the lowest price if the offeror meets the standards. According to FAR 15.101-2(a), LPTA is appropriate when the government expects to have the best value by choosing the lowest price that meets specific criteria. LPTA has gained a bad reputation for essentially three reasons: the failure to:

  1. Clearly set the minimum acceptable technical criteria at a level that will demonstrate the offeror’s capability to deliver the minimum service.
  2. Recognize the risk inherent from “cut to win” strategies where offerors cut corners or underbid a contract to win.
  3. Properly evaluate the responses according to the criteria.

Will source selection problems go away now that we are using trade-off instead of LPTA? No. Industry complained the government did not receive the best technical expertise when using an LPTA process because the government did not pay for expertise. Without including specific, measurable metrics in a contract, so-called “technical expertise” that is considered a strength rarely materializes, despite paying more. Then, industry complained trade-off selections are awarded to lowest priced bids, just like LPTA.

The government must properly set the minimum acceptable criteria and explain the trade-off between criteria. Otherwise, demonstrating an exceptional approach results in mere promises. The aviation maintenance contract at Fort Rucker incorporated specific, measurable metrics based on the proposal strengths to guarantee that DOD received the value from the trade-off process.

CASE STUDY: FORT RUCKER

As a case study, the aviation maintenance contract offers insight. The acquisition team used its experience in government contracting and identified six considerations that are critical to achieving the best value in a trade-off source selection:

  1. Identifying the minimum metrics and standards in the request for proposal (RFP), establishing what must be exceeded.
  2. Confirming strengths exceed a requirements metric, standard or lower performance risk.
  3. Ensuring that strengths are measurable, enforceable during performance, and provide positive trade-off benefit.
  4. Monetizing the strength’s benefit and justifying the cost trade-off.
  5. Ensuring that proposed strengths are written into the contract.
  6. Analyzing and documenting the requested criteria; the contractor’s proposed approach; the analysis and process to determine strengths and weakness; each contractor’s strengths and weaknesses; and the benefits or shortcomings related to each offeror.

The solicitation stated “[t]he requirement standard is met if …” and “[t]he requirement standard may be exceeded if…” The government set a minimum standard and clearly articulated how the offeror could exceed the requirement because the government wanted innovation to increase contract output and lower risk compared to the requirement baseline. For example, proposals included improved metrics, fewer errors, more production time, and higher reliability percentages that are integral to mission performance. Other proposals included processes to reduce risk. All were considered strengths during proposal evaluation because they exceeded the standard.

The government cannot raise or lower the resultant contract standards using an LPTA process. In a trade-off process, the government cannot lower the resultant contract standards, but it can raise the standards through a benefit trade-off. To ensure that proposed higher standards were contractually binding, the solicitation clearly stated “[a]dditionally, the offeror shall specify specific paragraphs in the solicitation package (i.e., PWS, PRS, etc.) that will be changed and incorporated in the resulting contract at the new level.” The solicitation also stated that “the offer must state specifically why the offeror considers the enhancement a strength demonstrating additional opportunity cost benefits through efficiency or effectiveness.”

MEANINGFUL DISCUSSIONS

The concept of “meaningful discussions” is talked about frequently but is not mentioned in the FAR or Defense Federal Acquisition Regulation Supplement, and is mentioned only once in Appendix AA of the Army Source Selection Supplement. However, the term has a very long and robust history of enforcement in Government Accountability Office decisions.

It comes from the requirements and directives of the FAR and in source selections, primarily from FAR Part 15.306. The FAR directs discussion of deficiencies, significant weaknesses and adverse past performance information to which the offeror has not yet had an opportunity to respond. Just as importantly, the FAR encourages the contracting officer to discuss other aspects of the contractor’s proposal that could be altered or explained to increase a contractor’s potential for award.

The aviation maintenance contract team provided the initial and interim source selection reports to the contractor as well as requested evaluation notice responses for all aspects of the proposal to receive the best value possible. The final evaluation reports were also provided after contract award.

The team used a local process call the APRI model. The model requires four points to be discussed in each evaluation notice, evaluation report and similar documents. The APRI model merits a separate article, but here is a short description:

A – What was asked for or requested?

P – What was provided by the offeror?

R – What is the analysis and result?

I – What are the implications?

Answering these four questions ensures a well-documented and thorough analysis because it matches the solicitation requirements with the contractor’s proposed solution and the government’s evaluation of the proposed solution. If the contractor is provided a copy of an evaluation report that follows the APRI model, it will know the source selection evaluation followed the solicitation requirements and can use the government’s analysis to provide better proposals in the future. In the event of a protest, the APRI model maps out the government’s position and provides a great source document to successfully defend against a protest.

The first part of the evaluation should compare and contrast the solicitation criteria and the offeror’s proposal. The comparison must include references and citations for a comprehensive document that will dramatically reduce miscommunication. Comprehensively documenting the analysis and results is time-consuming, and often information is missing or the analysis is incomplete. The evaluator must describe specifically what was evaluated, how it was evaluated and what the results of the evaluation were.

The last part of the APRI model, stating the implications, also tends to receive insufficient explanation; specifically, the “why” is missing. The offeror could be determined to not be the best value in the trade-off, but why? The answer might be increased risk of failure, increased risk of being able to hire qualified people, a lack of understanding of specific parts of the requirement, or some other specific implication the government determines. Contractors are able to better understand the government’s rationale and incorporate that knowledge during discussion exchanges as well as other proposals.

As part of the evaluation process before the request for final proposal revisions, each offeror received a unique conformed copy of its proposed contract that showed the proposed strengths written into the contract. The draft conformed contract included the proposed systems, changes in metrics and specific outcomes of products or processes. The conformed proposed contract allowed the offeror to confirm its intention to contractually bind the proposed strengths and determine if it wanted to propose additional changes for the final proposal submission. The interim evaluation report clearly articulated the government’s assessment and allowed the contractor to see proposal areas that needed improvement.

CONCLUSION

Using the trade-off process instead of LPTA does not require acquisition personnel to learn or re-learn their jobs. Contractors are not our adversaries—they are our partners, and we need to reassess our interactions with them. By clearly stating our requirements, fairly and transparently evaluating proposals, plainly and succinctly articulating the results of our evaluation, and working with offerors to produce the best possible proposals, we can achieve best value and follow the intent of the NDAA for FY17 and FY18.

For more information, contact the author at burrel.d.angell.civ@mail.mil

B. DEAN ANGELL is chief of the Mission Division at the Mission and Installation Contracting Command ­– Fort Sam Houston, Texas. Previously he was a senior procurement analyst for cost and pricing with the Mission and Installation Contracting Command Headquarters, and has more than 20 years of government service. He holds a DBA from Capella University, an MBA from Bellevue University and a bachelor’s degree in business administration from San Diego State University. He is Level III certified in contracting, and is an adjunct MBA professor for Bellevue University and Norwich University.

Related Links 

Fort Rucker aviation support contract transfers to MICC  https://www.army.mil/article/173678/fort_rucker_aviation_support_contract_transfers_to_micc

Federal Acquisition Regulation http://farsite.hill.af.mil/

Fort Rucker Aviation Maintenance Services https://www.govcb.com/government-bids/Fort-Rucker-Aviation-Maintenance-ADP14856020830002604.htm

Helicopter maintenance contract at Fort Rucker may change hands  https://www.dothaneagle.com/news/business/helicopter-maintenance-contract-at-fort-rucker-may-change-hands/article_003248a2-9cb7-11e7-b0af-1711f5a81eae.html

Don’t Just Hear—Listen

https://asc.army.mil/web/news-alt-ond18-dont-just-hear-listen/


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