The Two Types of Proposal Evaluation Approaches
There are two types of shoppers in this world. Those that like a deal and want to find the cheapest option and those that are all about quality and long term investment no matter the price. I personally fall into the quality and investment camp mostly, really just to avoid buying things repeatedly. While each strategy has its pros and cons I think for most people it really comes down to what you’re shopping for.
These same strategies apply when the source selection team is deciding on the evaluation criteria of a solicitation. Of course they’ll want the agency to get the best value out of the selected contractor, but how they figure out who that is depends on the type of work and of course budgets.
Let’s start with the bargain hunter.
In the contracting world this is called Lowest Price Technically Acceptable (LPTA). It’s best used when the requirements are clearly defined and there is minimal risk of screwing up the contract. In this case, the evaluators are looking for the lowest bid that can technically meet the requirements. So as long as you can prove you can do the work and have the lowest price, you’ll likely win the contract. Now, actually knowing how to price the contract and research about past work and competitors comes into play here so you can try to be the lowest bid. Just like the bargain hunters, as long as the product does what it needs to do, the store with the lowest price wins the buyer.
On to the shopper who sees purchases as a long term investment.
This is called the Tradeoff approach. Unlike LPTA, factors other than price are evaluated to choose a contractor. This could be past performance, technical approach, or staffing and resumes. In this case, you could be the highest bid but if you’ve proven the value you bring and why that’s more expensive than you could win the contract. While the Tradeoff approach is more complex, it’s because it’s best for contracts where the government agency needs more development help and is looking for guidance. This also means the chance to mess things up is greater. So, in order to award to the best business, the source selection committee has to see the entire picture, not just the lowest price.
Each evaluation approach has its pros and cons and can be helpful in determining if you should bid on a contract or not.
The benefit of LPTA is that the work is typically well defined so you’ll know exactly if it’s something you can do. But, the downside is you have to be the lowest price which can be tricky. If you know you can’t possibly be the lowest bidder and still make a profit then you have to weigh if writing the proposal is worth the time.
The benefit of Tradeoff evaluations is that not only do you not have to be the lowest price, you have other factors that are ranked so you can show your overall value. However, since the work for Tradeoff evaluations is more complex it’s important you can actually do the work and be more of a partner with the government agency. The risk is higher because if you do win but don’t deliver then that can leave a bad mark on your business and cause you to lose the work moving forward.
Just like your buying habits, think about what type of bidder you’re going to be. Will you go after LPTA contracts knowing you can be one of the lowest prices, or will you focus on Tradeoff solicitations where you can show all the value you bring and be rewarded for it. Maybe it’s a combination of both. But, that’s for you to decide based on you business.
To learn more about the evaluation process visit the FAR 15.101.