Last week we began a series on DoD's latest acquisition reform initiatives collectively referred to as Better Buying Power (BBP) 3.0. In total, there are 34 initiatives packaged into BBP 3.0 and you can see all of them in DoD's April 9, 2015 implementing directive. Some of these initiatives are internal to DoD like strengthening contract management. Our purpose is this series however is to focus on five that could impact a lot of Government contractors or prospective contractors. So far we've discussed (i) removing unproductive requirements imposed on industry, (ii) increasing the number and quality of should-cost reviews, and (iii) increasing the use of CPIF and FPIF contracts. Today we will discuss DoD's initiative to provide clear and objective "best value" definitions.
Included in the listing of initiatives to "Incentivize Innovation in Industry and Government", is a goal to provide clear and objective "best value" definitions to industry. This would make a lot of contractors very happy, if they can pull it off. Everyone understands awards made to the lowest bidder. But when other factors are introduced into the award criteria, a lot of bidders wonder whether the deck is stacked against them, that the Government has already decided on the "winner" and is using subject factors to make sure the award goes the way they want it to go. Many bid protests appealed to the GAO involve the Government's application of the "best-value continuum".
Under a best-value continuum, there is a recognition that the Government seeks to obtain the best value using different source selection approaches. At one end of the continuum there is the lowest price technically acceptable (LPTA) strategy. At the other end is the higher-price technically superior strategy. Factors such as price, past performance, and technical considerations are weighed to identify the quote that provides the Government with the best value. Part of the best value trade-off analysis involves conducting a risk analysis to consider whether the Government is willing to pay for achieving socioeconomic objectives, better past performance, better technical approach, or better management capabilities. When the Government decides to use non-price factors, which means that other than LPTA, the ordering activity must clearly state the priorities in the solicitation.
The BBP 3.0 initiative is to provide industry with information on the value, in monetary terms, of higher levels of performance than minimally acceptable or threshold levels. So, for example, if "minimally acceptable" is the baseline, what price premium will "good" or "outstanding" or "superior" add. Will it justify a price that is 5% higher, 10% higher, or what? With such information, contractors (and prospective contractors) will know what the competitive effect of offering higher performance will be and can bid accordingly. Not only will the information be useful to the bidding process but DoD expects that the practice will create incentives to encourage industry to innovate.
DoD plans to publish a Best Value process manual by May 2015. In the meantime, the Department has instructed its acquisition folks to ensure that best-value definitions for above threshold performance levels are transparent and objective and stated in monetary terms as much as possible.