Pentagon Slow to Move on Low-Cost Contract Regulations

Nov. 20, 2018 
By Andrew Clevenger, CQ

Almost two years after Congress required the Defense Department to regulate a widely used contracting tool aimed at driving down the costs of some weapons and services, the Pentagon has not done so, and has no plans to within the next year.

The tool — known as lowest price, technically acceptable — creates a set of criteria for straight-forward and well-defined contracts where there is little risk posed by poor performance, and there isn’t really any benefit to the Defense Department for better-than-expected performance.

In short, if a contractor meets all the Pentagon's needs for these types of contracts, the Defense Department should go with the least expensive option.
It's not the kind of contract officials would use for a new fighter jet or guided missile. And Congress has specifically blocked its use for protective gear for personnel. But for other low-risk contracts, like sorting mail at an Air Force base in Germany, lowest price technically acceptable (or LPTA) is an option.

In a report published last week, the Government Accountability Office chided the Defense Department for not issuing additional regulations on LPTA as instructed by the fiscal 2017 defense policy law (PL 115-328). GAO estimated that about one in four Pentagon contracts over $5 million used LPTA last year, but contracting officials are still confused about some of the criteria.

GAO found there were two criteria officials weren't considering for these contracts: if the goods being purchased are predominantly expendable in nature, nontechnical, or have a short life expectancy or shelf life; and if the lowest price reflects full life-cycle costs, including the cost of operations and support.

In issuing new regulations, the Pentagon should clarify these elements, GAO recommended.

In a written response to the report, the Pentagon concurred with GAO’s recommendations, but said it anticipates publishing new rules in the final quarter of fiscal 2019.
For Alan Chvotkin, the Professional Services Council’s executive vice president and counsel, that’s not soon enough.

“I’m not happy with the timeframe that they’ve established for implementation,” he said. “I’m happy that they’ve acknowledged the need to move out.”

The Trump administration’s executive order requiring government agencies to cut two regulations for every one it issues makes the Defense Department's work here more complicated. But that shouldn’t stop the Pentagon from complying with congressional mandates, Chvotkin said.

“I recognize that the two-for-one rule creates process gates that the rulemaking folks have to go through,” he said. “I would hope that they could navigate through those, particularly to meet statutory deadlines.”
The Professional Services Council's members include government contractors, both defense and civil.

Its members are still seeing contract solicitations where LPTA is being used inappropriately for complex jobs, Chvotkin said. On LPTA, the Pentagon is saying the right things, but that doesn’t always translate into policy as individual contracts are decided, Chvotkin said.

“Words from Defense Department senior leadership on LPTA aren’t being matched in the field,” he added.