New Study: LPTA Procurements Negatively Impact Government Contracts and Sacrifice Long-Term Value

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New study from Market Connections, Inc. and Centurion Research Solutions reveals how LPTA contracts are stifling innovation, driving down prices and sacrificing long-term value for short-term cost savings.

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Lowest Price Technically Acceptable (LPTA) contracts may be awarded to less qualified companies, sacrifice long-term value for short-term cost savings and could act to lower government contractors’ standards of performance, according to a new study from Market Connections, Inc. and Centurion Research Solutions.
These are a few of the findings of an online survey of both contractors and government procurement professionals, which gauged the impact of LPTA procurements on government agencies and the contractors who serve them.

“Although many contractors believe that LPTA contracts are stifling innovation, driving down prices and at times being used for the wrong types of federal procurements, LPTA contracts are not going away anytime soon,” said Lisa Dezzutti, President and CEO of Market Connections, Inc. “Contractors will continue to face the challenge of having to offer lower-cost solutions and will need to adjust their operational and pursuit strategies accordingly.”

In an online survey of 375 government contractors involved with business development or program management activities in their company, and 360 federal government decision-makers involved in the selection of contractors and vendors, the survey found that:

  • LPTA sacrifices long-term value: 65% of contractors and 43% of government employees believe that LPTA procurements sacrifice long-term value for short-term cost savings.
  • Less qualified contractors win LPTA contracts: Both audiences (71% contractors and 59% government) see the same two main drawbacks of LPTA for the federal government: the potential for contracts to be awarded to less qualified companies and sacrificing long-term value for short-term cost savings.
  • LPTA procurements will increase in the next three years: Both audiences believe that LPTA procurements will increase in the next three years (59% contractors vs. 42% government), overwhelmingly driven by federal budget restrictions.
  • Government employees are less familiar with LPTA: Nearly all contractors indicated they are either very familiar (77%) or somewhat familiar (19%) with LPTA. About two-thirds of government employee respondents are either very familiar (32%) or somewhat familiar (33%) with LPTA.

Contractors equate best value with LPTA procurements: Two-thirds of contractors (63%) are likely to equate an RFP specified as “Best Value” as an LPTA RFP.

Centurion Research Solutions identified $27.7 billion in actionable LPTA opportunities using its Business Intelligence NOW™ opportunity tracking tool, with an average annual value of $18 million. If indeed best value equates with LPTA, the total value of opportunities expands to $744.5 billion and the average annual value doubles to $38.8 million. Centurion identified Department of Defense as the top user of LPTA procurements, and the Department of Veterans Affairs and Department of Homeland Security as holding the most LPTA opportunities among civilian agencies.

“If indeed LPTA equates with best value, the scope of impact increases dramatically,” said Fritzi Serafin, Vice President of Research Services at Centurion Research Solutions. “The total dollar value of actionable opportunities increases more than 25-fold with the dollar value range expanding significantly, and the average annual value more than doubling.”

An overview of the study results is available for download at http://www.marketconnectionsinc.com/LPTA. The full report will be available for purchase in November.

About Market Connections, Inc.
Market Connections delivers actionable intelligence and insights that enable improved business performance and positioning for leading businesses, government agencies and trade associations. The custom market research firm is a sought-after authority on preferences, perceptions and trends among government executives and the contractors who serve them, offering deep domain expertise in information technology and telecommunications; healthcare; and education. Market Connections also provides the tools for organizations to expand thought leadership in their respective markets, and is known for the annual Federal Media and Marketing Study and ongoing PulsePolls™ of the government market. For more information, please visit: http://www.marketconnectionsinc.com.

About Centurion Research Solutions
Centurion Research Solutions, founded in 2003, is a business intelligence and analytics company with a simple mission: offer innovative solutions that help federal contractors efficiently win more government business. To achieve this mission, Centurion has been providing online, subscription-based services, custom research and analysis, tools and methodologies, professional services and in-depth training. Industry leaders such as Alion, Northrop Grumman, SAIC, Lockheed Martin, BAE Systems, InDyne, CACI and Raytheon rely on Centurion solutions, thought-leadership and expertise to help them identify and analyze relevant opportunities to win more government contracts. For more information, please visit: http://www.centurionresearch.com.
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Matt Langan
L&R Communications
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