Lowest Priced Technically Acceptable Procurements Not Always Acceptable: New DFARS Rule Continues Shake-Up of LPTA Procurements

On September 26, 2019, the Department of Defense issued a final rule amending the Defense Federal Acquisition Regulation Supplement to establish new restrictions on the use of Lowest Price Technically Acceptable source selection procedures.  Effective October 1, 2019, this new rule imposes specific limitations and prohibitions governing when and under what circumstances LPTA procedures are appropriate for a particular procurement.  The new rule has the potential to expand — and provide a more definite legal framework for — pre-award bid protests challenging the use of LPTA source selection procedures.

As previously discussed on this blog, the National Defense Authorization Act for Fiscal Year 2017 and the NDAA for Fiscal Year 2018 imposed new limitations and prohibitions on when DoD can use LPTA procedures.  The new DFARS rule implements these statutory provisions by amending several existing DFARS sections and adding a new section:  DFARS 215.101-2.The new rule makes four significant changes to the use of LPTA procedures.First, among other restrictions, DoD now must “avoid, to the maximum extent practicable, using” LPTA procedures for procurements that are “predominately for the acquisition of”:

  1. Information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, or other knowledge-based professional services;
  2. Personal protective equipment; or
  3. Knowledge-based training or logistics services in contingency operations or other operations outside the United States, including in Afghanistan or Iraq.

Second, DoD is outright prohibited from using LPTA procedures when procuring:

  1. Items designated by the requiring activity as personal protective equipment or an aviation critical safety item, when the requiring activity advises the contracting officer that the level of quality or failure of the equipment or item could result in combat casualties;
  2. Engineering and manufacturing development for a major defense acquisition program for which budgetary authority is requested beginning in fiscal year 2019; or
  3. An auditing contract.

Third, the new DFARS rule imposes a list of seven criteria that must be met in order for LPTA procedures to be permissible for a particular procurement, including:

  1. Minimum requirements can be described clearly and comprehensively and expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
  2. No, or minimal, value will be realized from a proposal that exceeds the minimum technical or performance requirements;
  3. The proposed technical approaches will require no, or minimal, subjective judgment by the source selection authority as to the desirability of one offeror’s proposal versus a competing proposal;
  4. The source selection authority has a high degree of confidence that reviewing the technical proposals of all offerors would not result in the identification of characteristics that could provide value or benefit;
  5. No, or minimal, additional innovation or future technological advantage will be realized by using a different source selection process;
  6. Goods to be procured are predominately expendable in nature, are nontechnical, or have a short life expectancy or short shelf life; and
  7. The contract file contains a determination that the lowest price reflects full-life cycle costs (as defined at FAR 7.101) of the product(s).

Fourth, the new DFARS rule requires contracting officers to document, in the contract file, “the circumstances justifying the use of” LPTA procedures.  In responding to comments on the proposed rule, DoD noted that “[t]he rule does not specify a format or method to be used to meet” the documentation requirement, and that “[p]ublicizing the justification with the solicitation is not required by statute and could result in increased cost and time burden to both Government and industry.”  As a result, it is likely that these written justifications will not be shared publicly as part of the solicitation process, but rather may end up being disclosed only in response to protests — and pursuant to protective orders.

The effect of the new DFARS rule on the number and type of LPTA procurements remains to be seen.  The discussion preceding the final rule states that “DoD does not have information on the total number of solicitations issued on an annual basis that specified the use of the LPTA source selection process” — suggesting that DoD itself does not have a sense of whether and by how much the new DFARS rule will decrease the use of LPTA procurements.

One thing seems certain, however:  the new rule will improve the viability of pre-award protests challenging the use of LPTA procedures.  Even before the final rule — and before the corresponding NDAA provisions — actual and prospective bidders could challenge an agency’s decision to use LPTA procedures, but prevailing on such an argument was extremely difficult, given the absence of specific criteria or factors that agencies were supposed to consider in making that determination.  The new DFARS rule now supplies those criteria and factors — and thus provides a firm analytical framework in which to anchor a protest.

The shake-up in the government’s use of LPTA procedures does not stop there.  DoD has issued guidance in the DFARS Procedures, Guidance, and Information to expand upon its interpretation of and approach to the new DFARS rule.  At this time, the guidance briefly addresses the process for determining whether a supply is “predominately expendable in nature” or “nontechnical,” or has a “short life expectancy” or “short shelf life.”  The guidance also addresses how to consider “full life-cycle costs” for a supply or service.

In addition, DoD, the General Services Administration, and NASA just released a proposed FAR rule that would implement similar restrictions that Congress imposed on the use of LPTA procurements by civilian agencies.  Stay tuned for more information about the proposed FAR rule and its similarities to and differences from the new DFARS rule.

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