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Defense Contracting: DOD’s Use of Lowest Price Technically Acceptable Source Selection Procedures to Acquire Selected Services

The Department of Defense (DOD) obligated about $300 billion through contracts for goods and services in fiscal year 2016. When awarding a contract competitively, DOD has several source selection procedures it can use to evaluate firms’ proposals. For example, DOD may use a best value, lowest price technically acceptable (LPTA) process. In the LPTA process, DOD awards the contract to the firm presenting the lowest priced proposal that is technically acceptable, and no tradeoffs are permitted. Alternatively, it can use a best value tradeoff process, in which it can vary the relative importance of cost or price to other factors such as
technical capability or past performance in its solicitations to firms. In these cases, DOD may award a contract to a firm presenting other than the lowest-priced proposal if it determines that a higher-priced firm provides a greater benefit to the department, and this greater benefit is worth paying an additional cost.

Section 813 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017 calls for DOD to avoid using LPTA procedures when doing so would deny DOD the benefits of making cost and technical tradeoffs in the source selection process. To implement this policy, Section 813 requires that DOD revise the Defense Federal Acquisition Regulation Supplement (DFARS) to allow the use of LPTA procedures only when  certain criteria are met. For example, one criterion is that contracting officials must determine that no, or little, value would be gained from a proposal exceeding the solicitation’s minimum technical requirements. The specific criteria are discussed in the background section of this report.

Section 813 also requires that LPTA procedures must be avoided to the “maximum extent practicable” in procurements of:

  • Information technology (IT) services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, or other knowledge-based professional services
  • Personal protective equipment, such as body armor;
  • and Knowledge-based training or logistics services in contingency or other  operations outside the United States


Further, Section 813 included a provision that we report on the number of instances where DOD used LPTA procedures for contracts exceeding $10 million, as well as an explanation of how acquisition officials considered the new criteria identified in Section 813. The objectives of this report were to assess the (1) extent to which DOD used LPTA procedures for contracts awarded in the first half of fiscal year 2017 for certain services and products identified in Section 813 valued at 10 million and above, and (2) factors that contracting officials considered when deciding to use LPTA procedures for these contracts. We selected the first half of fiscal year 2017 because that was the most recent time period for which data were available. To determine the extent to which DOD used LPTA source selection procedures in the first half of fiscal year 2017, we used data from the Federal procurement Data System-Next Generation (FPDS-NG) to identify a population of contracts valued at $10 million or above that were
awarded between October 1, 2016 and March 31, 2017 by the Departments of the Army, Navy, and Air Force.



These military departments represented almost 80 percent of DOD procurement spending in fiscal year 2016, and collectively accounted for 781, or over 64 percent, of DOD’s 1,212 new contracts reported in FPDS-NG with total estimated values of $10 million or above awarded during the 6-month period we reviewed. We determined that FPDS-NG was sufficiently reliable for the purposes of identifying these contracts by tracing relevant FPDS-NG data to the contracts we reviewed and related documents. We identified a population of 781 new contract awards that were within the scope of our review. Our scope includes stand-alone contracts and the initial award of indefinite delivery, indefinite quantity (IDIQ) contracts, but excludes subsequent orders issued under these contracts because solicitation data is not readily available for orders.Our scope also excluded blanket purchase agreements and basic ordering agreements.

 

 

These military departments represented almost 80 percent of DOD procurement spending in fiscal year 2016, and collectively accounted for 781, or over 64 percent, of DOD’s 1,212 new contracts reported in FPDS-NG with total estimated values of $10 million or above awarded during the 6-month period we reviewed. We determined that FPDS-NG was sufficiently reliable for the purposes of identifying these contracts by tracing relevant FPDS-NG data to the contracts we reviewed and related documents. We identified a population of 781 new contract awards that were within the scope of our review. Our scope includes stand-alone contracts and the initial award of indefinite delivery, indefinite quantity (IDIQ) contracts, but excludes subsequent orders issued under these contracts because solicitation data is not readily available for orders.Our scope also excluded blanket purchase agreements and basic ordering agreements.We focused our review on contracts for categories of products and services that could include those listed in Section 813 of the fiscal year 2017 NDAA for which DOD should, to the maximum extent practicable, avoid using LPTA source selection procedures.

Through analysis of FPDS-NG product and service code information, we identified the following four categories which could contain such products or services:

  • Information technology and telecommunications;
  • Support services, which include professional/administrative/management services;
  • Ammunition and explosives, which include tactical sets that may include personal protective equipment; and
  • Clothing and individual equipment, which includes protective clothing and personal armor (or in other words, personal protective equipment)

From the 781 contracts that were within the scope of our review, we identified 147 contracts in one of these four categories. Fourteen of these were in the ammunition category. We did not identify any contracts in the clothing category. We reviewed descriptions of what was purchased under these 14 awards and also requested that DOD identify any contracts that included the purchase of personal protective equipment. The Army, Navy, and Air Force confirmed that none of the 14 contracts in the ammunition category included personal protective equipment. The remaining 133 contracts identified were for services coded as IT or support services, which include knowledge-based professional services.

 

Full report at http://www.gao.gov/assets/690/688680.pdf

 

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