When sequestration was looming in the distance, I wrote about the trend we were seeing for federal contracts to be awarded based on LPTA criteria – “lowest price technically acceptable,” and the negative impact this has on small businesses. Unfortunately, the trend is continuing.
LPTA is overpowering the “best value” approach, where the government seeks to award technical excellence in a proposal. This new movement is obviously driven by budget concerns and constraints, which are valid. We all recognize the U.S. Federal Government has significant budgetary constraints.
So how can you succeed as a small business federal contractor under these circumstances? How do you win business? How does this migration towards a lowest-pricing strategy affect all the things we’ve been talking about on this blog?
We’ve talked many times about how developing a relationship is your key business-building activity. It still is, but you’ll want to handle it a little differently in a low-price world than if you were looking at best value.
First, you want to think about how you can help the customer (your program folks, the people with whom you have the relationships) shape the definition of “technically acceptable” as they’re designing their Request For Proposal (RFP). The more the definition looks like or favors your company, the better your chances of winning.
Make use of Judy Bradt’s backcasting techniques to determine when an RFP is coming, and then work backwards so you’re having meaningful conversations with your contacts that help them understand what you do and how your level of technical expertise is essential to their project.
The second thing you want to bring into your relationships in the LPTA world is an in-depth understanding of your customer’s cost parameters. That’s going to be far more important than the “hot buttons” you may have focused on when bidding based on best value.
I’ve heard horror stories of long-term incumbents losing a contract because someone came in and way underbid them. The government accepted that bid, moved to a new supplier, and suffered from their incompetence.
If the government wants innovation, it had better be part of their definition of technically acceptable so the cost of that innovation is built right into the RFP and contractors will have to demonstrate that type of innovation in order to get the job.
It’s like a pendulum swing. This has happened before. There were other periods where low price was the only thing that counted. As we know, low price belies technical excellence – the LPTA approach makes it less likely to get the best technically excellent and innovative solutions because those things cost extra money. And that’s why the pendulum always swings back around again to best value.