You Get What You Pay For

Over the last several years the Lowest Price, Technically Acceptable paradigm for government acquisition has changed the game for winning federal government IT support services (ITSS) business – in more ways than one.  Even when a procurement is conducted with Best Value criteria, we usually see the LPTA guy win.  How are they doing it?  With innovation?

Anecdotes from current and past federal agency CIOs provide an inkling of the shenanigans in play.  We see contractors cutting hourly rates and squeezing their employees’ compensation and benefits to be the lowest price.  We see profit margins getting slim, leading some big players to get out of the IT business altogether (see Forbes article here  We see contractors bidding the price-to-win, with no strategy except to cut or replace staff with less experienced (lower salary) personnel.  We see gaming the contract, with crafty assumptions that enable the contractor to argue for change orders post award. We see contractors who simply plan to deliver lower quality, take their monthly program review beatings, and continue to collect for years because they know their customer doesn’t want to run another lengthy and costly procurement to replace them.  All these shenanigans are methods for a contractor to avoid innovation while still appearing to innovate.

This author would be pleased to report that pressure on price also resulted in innovations that delivered better outcomes at a lower price.  Certainly, Hygeia has reacted that way, offering transformative proposals when agencies issued solicitations that gave us the flexibility to innovate.  No doubt others out there are doing the same.  But we are not hearing anecdotes of such transform-and-operate awards.  The above strategies seem to win more often than innovation. It seems that the LPTA paradigm is leading agencies, at least some of the time, to get the lowest price, unacceptable outcome.

This doesn’t have to be the case. Some adjustments in procurement strategy might help an agency get the lowest price, technically superior solution.  The agency needs to enable innovators to compete, and they need to weed out the pretenders from the real contenders.  To that end, here are three ideas for consideration when defining the acquisition strategy:

  1. Document and issue the current situation, including the service levels on key performance indicators; the level of effort required to deliver those service levels; and the details of the present infrastructure, applications, users, locations, and data. This closes the gap between competitors’ knowledge of the current situation and the incumbent’s.  This information needs to be accurate, so the environment data would be best collected and documented by an agentless, automated, comprehensive discovery tool, like from ServiceNow.
  2. Issue the solicitation as a statement of objectives, such as the outcomes desired and minimum service levels to be provided in each area of scope. Provide the performance work statement under which the incumbent contractor is performing, but don’t require the objectives to be achieved according to the approach in that PWS.  This will enable competitors to innovate while assuring they provide all the service the agency requires.
  3. Require the bidders to include, in their proposals, their approach, project plan, and milestones for transforming the methods by which their services, and proposed service levels, are to be delivered. Have them show this in both the technical volume and price volume, with the latter including traceability of transformation milestones to price changes downward by year.  This will enable the agency to weed out “low ballers” and see the true transformers: those with innovations and a responsible plan to deliver them.

An acquisition strategy that uses these three ideas increases the government’s visibility into what they are really going to get for the price they pay.