When awarding a contract competitively, The Department of Defense (DOD) may use the lowest price technically acceptable (LPTA) process, under which the lowest price is the determining factor when selecting an offer. Section 813 in the National Defense Authorizations Act (NDAA) contained a provision for the Government Accountability Office (GAO) to submit four annual reports on DOD’s use of the LPTA process for contracts exceeding $5 million as well as how contracting officials considered eight specific criteria. GAO issued its first report in response to this provision in November 2017.
This second report, released November 13, assesses the extent to which DOD used the LPTA process in fiscal year 2017 and how contracting officials considered Section 813 criteria when using the LPTA process.
Section 813 of the NDAA is a new directive governing the use of LPTA contracts awards by DOD. Under the new law, the DOD is directed to steer clear of using LPTA as an acquisition strategy when doing so would negate the ability of DoD source selection teams the ability to utilize cost and technical tradeoffs.
For this second investigation, GAO selected a generalizable sample of 172 DOD contracts and orders valued at $5 million and above that were competitively awarded in fiscal year 2017. GAO verified that 46 of these contracts and orders used the LPTA process by reviewing solicitations. GAO selected 14 contracts and orders from the 46 based on the most frequently purchased products and services, reviewed documents, and interviewed officials to determine if the Section 813 criteria were considered.
GAO estimates that about 26 percent of the Department of Defense’s (DOD) contracts and orders valued $5 million and above in fiscal year 2017 were competitively awarded using the lowest price technically acceptable (LPTA) process. DOD used the LPTA process to buy such things as equipment, fuel, information technology services and construction services.
Section 813 of the NDAA for Fiscal Year 2017, as amended, mandated that DOD revise its regulations to require that eight criteria be considered when using the LPTA process. GAO found that as of September 2018, DOD had not yet done so. Accordingly, a DOD acquisition policy official stated that contracting officers are not yet required to consider these criteria. Nevertheless, GAO found that contracting officials generally considered most criteria for the 14 contracts and orders GAO reviewed.
Some contracting officials GAO interviewed were confused about how to apply some of the criteria, notably the requirement for written justification for the use of the LPTA process in the contract file; the need for lowest price to reflect full life-cycle costs, including operations and support; and the criterion regarding whether goods purchased are predominantly expendable in nature, non-technical or have a short life expectancy.
Four of the 14 contracting officials stated that they did not understand how to apply the criterion regarding whether purchased goods are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life. Additionally, 8 of the 14 contracting officials stated the criterion regarding an assessment of life-cycle costs was not applicable to their acquisitions.
GAO recommends that DOD address, as regulations are updated, how contracting officials should apply the Section 813 criteria that were generally not considered. DOD concurred with the recommendations and plans to revise its regulations and issue additional guidance by the end of fiscal year 2019.