Defense Primer: Lowest Price Technically Acceptable Contracts

Updated August 15, 2024

Defense Primer: Lowest Price Technically Acceptable Contracts

Background

When procuring goods or services, the Department of

Defense (DOD) generally seeks to obtain the best value for

the government by encouraging full and open competition,

as required by the 1984 Competition in Contracting Act

(P.L. 98-369, also known as CICA). Full and open

competition occurs when all eligible prospective contractors

are permitted to submit bids or proposals in response to a

proposed contract action.

Best value, when used in the context of government

procurement, refers to the expected outcome of an

acquisition that, in the government’s estimation,

provides the greatest overall benefit in response to

the requirement (Federal Acquisition Regulation

2.101).

Getting the Best Value for DOD

CICA generally mandates that, whenever practical, DOD

must obtain full and open competition through the use of

competitive contracting procedures. Part 15.101 of the

Federal Acquisition Regulation (FAR) establishes two

primary types of competitive source selection procedures

intended to obtain the best overall value for DOD: (1) the

tradeoff process and (2) the lowest price technically

acceptable (LPTA) process. The tradeoff process is

generally used when DOD is awarding a contract and

considering cost as one of several selection factors. For

example, DOD may also award contracts based on noncost-related factors including quality and performance, a

firm’s technical or managerial expertise, or past

performance. Each of these criteria may be evaluated on a

sliding or pass/fail basis. The use of LPTA is appropriate

when DOD is awarding a contract and considering price as

the sole selection factor. The LPTA process uses price as

the sole determining factor for all proposals deemed to be

“technically acceptable,” or for a proposal that meets

DOD’s specified minimum performance requirements. Past

performance does not need to be an evaluation factor when

it is not relevant for the particular acquisition.

In recent years, DOD has faced criticism for using LPTA

instead of a tradeoff process in certain acquisitions.

Congress has expressed concern regarding the perceived

inappropriate use of LPTA and has passed legislation

limiting DOD’s use of LPTA.

Cost Benefits

Under LPTA, DOD evaluates all factors other than price on

an acceptable or unacceptable basis and does not consider

levels of quality beyond that binary description. Some

observers have asserted that, in circumstances where DOD

cannot appreciably benefit from exceeding its stated

minimum technical requirements, the use of LPTA may

result in savings.

Accelerated Time Frames

In certain circumstances, the LPTA process may offer a

more streamlined and simplified approach to procuring

certain goods and services. Firms bidding for a contract

may understand the specific thresholds of acceptability and

can sometimes submit proposals more quickly. For DOD

contracting officers, award decisions require relatively less

subjective analysis compared to other source selection

processes, and may accelerate decisionmaking.

Fewer Bid Protests

Contracts awarded on the basis of lowest price may be

considered easier to defend against bid protests. In 2015,

then Under Secretary of Defense for Acquisition,

Technology, and Logistics Frank Kendall identified such a

benefit, stating that “objective source-selection criteria are

harder to contest successfully.” However, he cautioned that

source-selection criteria and acquisition strategies should

not be designed around limiting the likelihood of bid

protests.

When is LPTA Appropriate?

According to the FAR, the LPTA process is considered best

suited for contracts in which

•

•

•

•

contract requirements are well defined, simple, or reoccurring;

there is a low risk for poor performance;

there is little development work to be completed; and

there is no appreciable value to DOD for performance

exceeding the technical requirements.

Recent changes to statute and regulation have set forth

specific requirements for the use of LPTA and

circumstances where DOD should generally avoid the use

of LPTA. Section 813 of the FY2017 National Defense

Authorization Act (NDAA) (P.L. 114-328) required that

DOD only use LPTA if the following conditions are met:

• minimum contract requirements in terms of performance

objectives, measures, and standards are clearly identified;

• there is little or no value in exceeding the minimum technical

or performance requirements set forth in the proposal request;

• there is little or no subjective evaluation as to the desirability

Benefits to Using LPTA

Some analysts argue that DOD may benefit from certain

use of the LPTA process, including potential cost benefits,

accelerated acquisition time frames, and fewer bid protests.

of one proposal versus another;

• there is a high degree of confidence that a review of technical

proposals other than the lowest bidder would not result in the

identification of factors that could provide value or benefit to

DOD;

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Defense Primer: Lowest Price Technically Acceptable Contracts

• little or no additional innovation or future technological

•

•

•

advantage will be achieved by using a different source

selection process;

any goods being obtained are generally expendable in nature,

are nontechnical, or have a short life expectancy or shelf life;

a justification is included for the use of an LPTA evaluation

methodology in the contract file; and

DOD has determined that the lowest price reflects full lifecycle costs, including operations and support.

DOD is also required to avoid, to the maximum extent

practical, the use of LPTA for procurements predominantly

intended to acquire knowledge-based professional services

(such as cybersecurity services); personal protective

equipment; or knowledge-based training or logistics

services in support of contingency operations or other

operations outside of the United States. Other specific

prohibitions on the use of LPTA can be found in statute,

including 10 U.S.C. §4232, which prohibits the use of

LPTA for the engineering and manufacturing development

of a major defense acquisition program.

Case Study: Air Force Use of LPTA

In 2017, the Government Accountability Office (GAO)

reviewed a $21.5 million Air Force contract for

centralized mail sorting services in Germany. The Air

Force used LPTA, as the requirements for the service

were well defined and noncomplex. The risk and

consequences of poor performance were low and there

was no appreciable value for performance exceeding the

minimum stated requirements.

DOD Use of LPTA

In 2010, DOD introduced its Better Buying Power (BBP)

initiative, which was aimed at cutting acquisition costs by

$100 billion over a five-year period. Under this policy,

LPTA was viewed as a source selection procedure that

might help DOD reduce expenditures. In 2014, GAO found

that LPTA was highly attractive to DOD contracting and

program officials due in part to declining budgets and

initiatives such as BBP. According to GAO, from FY2009

to FY2013, DOD’s use of LPTA for new, competitively

awarded contracts grew from 26% to 36%. Similarly, a

Bloomberg analysis found that there was an appreciable

increase in DOD’s use of LPTA between 2008 and 2017. A

2019 GAO study also found that DOD used the LPTA

process 25% of the time for competitive contracts greater

than $5 million, compared with other federal agencies,

which used the LPTA process 7% of the time. Some

observers have drawn attention to the perceived correlation

between increased use of LTPA and budget constraints.

Some critics of DOD’s use of LPTA argue that by not

providing industry with a business incentive to offer better

performance, there is no motivation for industry to develop

new, improved, or innovative products and services in

circumstances where DOD could benefit from better

contractor performance. The use of LPTA conditions the

government market to offer potentially less desirable goods

and services because the incentive structure encourages

firms to reduce their prices as long as their product remains

above the threshold of technical acceptability. Further,

critics argue that LPTA contracts are not always the most

effective and efficient approach to ensuring quality and

performance in the long term. These analysts argue that the

use of LPTA may sacrifice long-term value for short-term

savings.

Recent Congressional Activity

Congress has expressed concern regarding the inappropriate

use of LPTA for source selection. As noted in the FY2016

NDAA Conference Report (H.Rept. 114-270), Congress

has been “concerned that … bias towards reducing prices

paid by [DOD] to the exclusion of other factors could result

in DOD buying low cost products that have the potential to

negatively impact the safety of U.S. military personnel.”

Recent Legislation

FY2017 NDAA (P.L. 114-328)

Section 813: Required DOD to avoid using LPTA when

doing so would deny the benefits of cost and technical

tradeoffs in the source selection process and when acquiring

information technology services, personal protective

equipment, and knowledge-based services.

Section 814: Prohibited DOD from using LPTA when

procuring personal protective equipment, where the level of

quality or failure of the item could result in combat

casualties.

Section 892: Prohibited DOD from using LPTA for

acquisition of audit services.

FY2018 NDAA (P.L. 115-91)

Section 822: Specified that LPTA may only be used when

there is no, or minimal, prospect for future technological

advantage or for items that are expendable, nontechnical, or

expected to have short shelf lives.

Section 832: Prohibited the use of LPTA for the

engineering and manufacturing development of Major

Defense Acquisition Programs. The Senate Armed Services

Committee report noted that, while DOD did not classify

the source selection process used to acquire the Northrop

Grumman B-21 Raider as an LPTA process, the acquisition

procedure used resembled an LPTA process, not a trade-off

process.

Additional Provisions: Prohibited the use of LPTA for

selected software development programs (Section 874),

aviation critical safety items Section 882), and audit

services (Section 1002).

FY2019 NDAA (P.L. 115-232)

Section 880: Prohibited government agencies from using

LPTA when doing so would deny the benefits of cost and

technical tradeoffs in the source selection process.

Specifically, use of LPTA was prohibited when acquiring

personal protective equipment and certain knowledge based

services (e.g., cybersecurity).

FY2020 NDAA (P.L. 116-92)

Section 806: Required revision to the Federal Procurement

Data System (FPDS, or any successor system) to facilitate

the collection of complete, timely, and reliable data on the

source selection process, to include tracking the usage of

source selection mechanisms.

Alexandra G. Neenan, Analyst in U.S. Defense

Infrastructure Policy

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Defense Primer: Lowest Price Technically Acceptable Contracts

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