The FAR establishes several types of source selection procedures, which include the tradeoff procedure on one end of the best value continuum and LPTA procedures on the other end. (see fig. 1). DOD may elect to use the LPTA procedure where the requirement is clearly defined and the risk of unsuccessful contract performance is minimal. In such cases, DOD has determined that cost or price should play a dominant role in the source selection. When using LPTA procedures, DOD specifies its minimum requirements in the solicitation. Firms submit their proposals and DOD determines which of the proposals meet or exceed those requirements, no tradeoffs between cost or price and non-cost factors (for example, technical capabilities or past performance) are permitted, and the award is made based on the lowest price technically acceptable proposal submitted to the government. Non- cost factors are rated on an acceptable or unacceptable basis. By contrast, DOD may elect to use tradeoff procedures in acquisitions where the requirement is less definitive, more development work is required, or the acquisition has a greater performance risk. In these instances, non-cost factors may play a dominant role in the source selection process. Tradeoffs between price and non-cost factors allow DOD to accept other than the lowest priced proposal. The FAR requires DOD to state in the solicitation whether all evaluation factors other than cost or price, when combined, are significantly more important than, approximately equal to, or significantly less important than cost or price. DOD’s March 2016 Source Selection guide offers additional guidance regarding the use of LPTA source selection procedures. The guidance is mandatory for acquisitions conducted as part of a major system acquisition program and all competitive FAR part 15 procurements with an estimated value over $10 million. The guidance states that LPTA procedures may be used in situations where there would not be any value on a product or service exceeding the required technical or performance requirements. The guidance also states that such situations may include acquisitions for well-defined, commercial, or non-complex products or services and where risk of unsuccessful contract performance is minimal, and when it has been determined there would be no need or value to pay more for higher performance. Section 813 of the fiscal year 2017 NDAA required that DOD revise the DFARS to require that LPTA procedures only be used in situations when the following six criteria are met. 1. DOD can clearly describe the minimum requirements in terms of performance objectives, measures, and standards that will be used to determine acceptability of offers; 2. DOD would realize no, or little, value from a proposal exceeding the solicitation’s minimum technical requirements; 3. The proposed technical approaches can be evaluated with little or no subjectivity as to the desirability of one versus the other; 4. There is a high degree of certainty that a review of technical proposals other than that of the lowest-price offeror would not identity factors that could provide other benefits to the government; 5. The contracting officer has included a justification for the use of LPTA procedures in the contract file; and 6. The lowest price reflects full life-cycle costs, including for operations and support. Section 813 also established that implementing revisions to the DFARS were to be completed within 120 days of enactment of the NDAA, but the revisions had not been put in place as of October 2017. DOD officials stated that the changes to the DFARS are currently in progress. In 2010 and 2014, we reported on DOD’s use of best value tradeoff source selection procedures. In 2010, we found that, for 60 of the 88 contracts reviewed, DOD used a tradeoff process and weighted non-cost factors as more important than price. In these cases, DOD was willing to pay more when a firm demonstrated it understood complex technical issues more thoroughly, could provide a needed good or service to meet deadlines, or had a proven track record in successfully delivering products or services of a similar nature. In addition, we determined that when making tradeoff decisions, DOD selected a lower priced proposal nearly as often as it selected a higher technically rated, but more costly, proposal. In so doing, DOD chose not to pay more than $800 million in proposed costs by selecting a lower priced offer over a higher technically rated offer in 18 contracts. The majority of solicitations where non-cost factors were equal to or less important than cost were for less complex requirements. DOD faced several challenges when using best value tradeoff procedures, including: the difficulties in developing meaningful evaluation factors, the additional time investment needed to conduct best value procurements, and the greater level of business judgment required of acquisition staff when compared to other acquisition approaches. To help DOD effectively employ the best value tradeoff process, we recommended that DOD develop training elements such as case studies that focus on reaching tradeoff decisions. DOD concurred and implemented the recommendation in August 2012. In 2014, we found that DOD had increased its use of LPTA procedures for new contracts with obligations over $25 million—using LPTA source selection procedures to award an estimated 36 percent of new fiscal year 2013 contracts compared to 26 percent in fiscal year 2009—and that officials’ decisions on which source selection method would be used was generally rooted in knowledge about the requirements and contractors. For contracts with obligations over $25 million, DOD used LPTA source selection procedures primarily to acquire commercial products such as fuel, and we identified relatively few uses of LPTA to acquire higher dollar services. For contracts with obligations over $1 million and under $25 million, DOD used LPTA procedures an estimated 45 percent of the time for a mix of products and services, including fuel, aircraft parts, computer equipment, construction-related services, engineering support services, and ship maintenance and repairs. We did not make recommendations to DOD in this report. The Army, Navy, and Air Force rarely used LPTA source selection procedures for IT and support services contracts valued at $10 million or more that were awarded in the first half of fiscal year 2017. Our analysis found that the three military departments awarded 781 new contracts valued at $10 million or more during this time frame. Of these 781 contracts, 133 contracts were awarded for IT and support services. However, only 9 of the 133 contracts used LPTA source selection procedures (see fig. 2). Table 1 provides information on the 7 contracts we reviewed that were awarded in the first half of fiscal year 2017 that used LPTA source selection procedures. As previously noted, we excluded 2 of the 9 contracts from further review due to bid protests. Contracting officials cited a number of factors that were considered when determining to use LPTA procedures in the 7 selected contracts we reviewed. For all of the contracts, officials determined that the government would not receive a benefit for paying more than the lowest price. For these contracts, contracting officials also stated that LPTA procedures were used, in part, because the requirements were well- defined, non-complex, or reoccurring. Additional details on the contracts follow. The Army awarded an IDIQ contract, with a one-year base period and four 1-year options, for support services in Afghanistan with an estimated ceiling value of $85,000,000. This is a reoccurring requirement to hire Afghan nationals to provide on-site construction management, engineering, and technical support services for reconstruction projects throughout Afghanistan. The acquisition plan states that Afghan nationals can more freely move about the country compared to U.S. personnel. Further, a contracting official stated that it was determined that no additional value would be gained by paying a premium for these services and that the lowest price was the best choice. In addition, to mitigate risk of poor performance, one requirement of the contract is to maintain a qualified workforce. Officials stated that approximately 90 percent of personnel performing on the previous contract are working on the current contract. The Air Force awarded three contracts for base operation support services—vehicle maintenance, airfield maintenance, fuel management, and traffic management—at an Air Force Reserve Base and two Air Reserve Stations. All of the contracts were awarded with a one-month orientation period, one-year base period, four 1-year options, and a final 6-month option, with total estimated values ranging from $24.7 million to $38.2 million. Acquisition plans for these requirements stated that the services were well defined. Additionally, contracting officials stated that there is at least a decade of past experience with these requirements, and, as a result, the requirements are well known. The Air Force awarded a contract for centralized mail sorting services in Germany. The contract consists of a 2-month phase-in period, a 2- month base period, four 1-year options, and one 8-month option, with a total estimated value of approximately $21.5 million. The acquisition plan for this requirement stated that a LPTA source selection procedure was chosen because the requirement was well-defined and not technically complex. For example, the acquisition plan noted that there was more than a decade of historical data that helped define and estimate the volume of mail that would need to be sorted. Contracting officials reiterated that LPTA was used since the service was well-defined, the risk of poor performance was low, and that it was determined that additional trade-offs would not provide an additional benefit to the taxpayer. The Army awarded an IDIQ contract to look for vulnerabilities in software code. The contract, which was set aside for small businesses, had a 5-year ordering period and an estimated ceiling value of $17.1 million. The contractor was required to perform a software review using several government approved code analysis tools and then characterize any potential vulnerabilities identified by the tools in terms of risk levels prescribed by established government cybersecurity standards. Army requirements officials stated that they determined there was no additional value to be gained from additional innovations in doing either task. Our review found some indication that the requirement, however, might not have been clearly understood by offerors. For example, the Army received 12 offers which ranged from $800,177 to $46,680,003. The contracting officer attributed the range of offers to the inexperience of some offerors with preparing proposals or misunderstanding this type of requirement, and the two lowest offers were determined to be technically unacceptable. The Navy awarded a contract to perform commercially available monthly telephone maintenance, which includes preventive and remedial maintenance on a specific brand of phone systems that Navy locations in California use. The contract consists of a one-year base period and two 1-year options, with an estimated total value of approximately $15.9 million. The acquisition plan stated that only certified authorized dealers could perform maintenance on these phones. A contracting official stated the requirement was well-defined and required the highest tier of maintenance options that could be offered, and, as a result, there was no tradeoff available. The highest tier requires that maintenance be available 24 hours a day, 7 days a week in multiple Navy locations, and that the contractor must respond to emergencies within 15 minutes during normal business hours. The contract also includes maintenance for all switches, inside wiring and any necessary relocation services, among other support requirements. 1. One contracting official determined that minimum performance requirements for the $15.9 million contract for monthly telephone maintenance services could be described using objective performance measures, and the contract documents showed the technical acceptability of offers was tied to the description of these requirements in the statement of work. In another example, documents related to the award of a $27.9 million Air Force contract for base operations services show performance objectives and standards set forth as evaluation factors. procedures may be used only when DOD would realize little or no value from a proposal that exceeds the solicitation’s minimum technical requirements. Our interviews with contracting officials and review of contract documents found that in each case, DOD officials assessed whether the department could receive value from a contract awarded on a tradeoff basis where the proposal exceeded the minimum technical requirements, and determined that there would be no additional value to be gained. 3. Most officials said they felt that it was possible to evaluate the proposals they received with little subjectivity, although they had not always explicitly made and documented this assessment. Officials for two contracts stated, for example, that the threshold question of technical acceptability for their contracts was whether the offering firms possessed certain licenses or accreditation to perform services on specific equipment or in specific locations. No subjectivity was involved in this assessment; therefore, they viewed the question of technical acceptability as essentially objective. However, because they were not required to document this assessment, contract documents did not provide evidence of an assessment of subjectivity. 4. Officials for most of the contracts we reviewed stated they had determined that a review of technical proposals other than that of the lowest-price offeror would not identity factors that could provide other benefits. In one case officials ultimately reviewed additional proposals, which is allowed under current DOD source selection guidance. DOD’s March 2016 source selection guidance does not require contracting officers to consider the fifth and sixth criteria listed in Section 813. Accordingly, we found that contracting officers did not always document justifications for choosing LPTA procedures and did not determine that the lowest price offered reflected full life-cycle costs. Specifically, we found that: 5. Although the files for all 7 contracts contained some record of the choice of LPTA source selection procedures, files for 3 of the 7 contracts simply stated that LPTA procedures would be used and did not include an explanation or justification for the choice. Only the documents for the four Air Force contracts included some explanation of the reasons for choosing LPTA source selection procedures. While not required by DOD source selection guidance when our selected contracts were approaching source selection, providing a justification for using LPTA is one of the criteria that Section 813 requires DOD to include among the revisions to the DFARS. 6. None of the officials for our selected contracts had confirmed that the lowest price offered reflected full life-cycle costs, which is one of the criteria that Section 813 requires DOD to include among the revisions to the DFARS. For the mail delivery, telephone maintenance, and base operations support contracts we reviewed, two contracting officials noted that full life-cycle costs were not applicable and a third stated that life-cycle costs cannot be determined for a service contract. As previously noted, all of the contracts in our review were for services, not for products. A Defense Procurement and Acquisition Policy official acknowledged that the application of the criterion could cause confusion and that DOD officials are considering this issue as part of efforts to revise the DFARS. As previously noted, DOD is currently developing the revisions to the DFARS that are contemplated by Section 813. DOD officials could not provide a specific timeframe for when the DFARS would be revised, noting that the revisions would need to be reviewed by the Office of Information and Regulatory Affairs at the Office of Management and Budget, and then released for public comment before the revisions could be finalized. We are not making any recommendations in this report. We provided a draft of this report to DOD for comment. DOD had no comments on the draft report. We are sending copies of this report to appropriate congressional committees and the Secretary of Defense. The report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or dinapolit@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I. In addition to the contact named above, the following staff members made key contributions to this report: Justin Jaynes (Assistant Director), Matthew T. Crosby, Lorraine Ettaro, Stephanie Gustafson, Julia Kennon, Victoria Klepacz, W. William Russell, Roxanna Sun, Ann Marie Udale, Khristi Wilkins, and Lauren Wright.

Summary: DOD obligated about $300 billion through contracts for goods and services in fiscal year 2016. When awarding a contract competitively, DOD may use the LPTA source selection process to select the lowest-priced offer that is technically acceptable. In contrast, DOD may use the trade-off source selection process to award a higher-priced contract to a firm if the firm's offer provides greater benefit and it is worth paying the additional cost. The National Defense Authorization Act for Fiscal Year 2017 calls on DOD to avoid using the LPTA process for information technology, cybersecurity, and other knowledge-based professional support services. The Act also included a provision for GAO to report on DOD's use of LPTA procedures for contracts valued at more than $10 million. This report assesses the (1) extent to which DOD used LPTA procedures for certain services, and (2) factors that contracting officials considered when deciding to use LPTA procedures. GAO reviewed data from the Federal Procurement Data System-Next Generation to identify 781 contracts valued at $10 million or above awarded by the Army, Navy, and Air Force in the first half of fiscal year 2017, the most recent period for which data were available. GAO then selected 133 of these contracts for information technology and support services, which include services reflected in the Act. GAO identified that 9 contracts used LPTA procedures and reviewed 7 of these, including interviewing officials and reviewing contract documents. DOD had no comments on the draft report. During the first half of fiscal year 2017, the Army, Navy, and Air Force rarely used lowest price technically acceptable (LPTA) source selection procedures when awarding contracts valued at $10 million or more for the types of services identified by the National Defense Authorization Act, such as information technology services. Department of Defense (DOD) guidance states that LPTA procedures are typically for requirements that are well-defined, commercial, or non-complex products or services with a minimal risk of unsuccessful contract performance. The figure shows the military departments' limited use of LPTA procedures for contracts for selected services. For the 7 contracts that GAO reviewed, contracting officials determined that the government would not receive a benefit for paying more than the lowest price. Contracting officials also stated that LPTA was used, in part, because the requirements were well-defined, non-complex, or reoccurring. For example, the Navy used LPTA procedures to award a contract for commercially available monthly telephone maintenance services. In addition, the Air Force used LPTA procedures to award a contract for mail sorting and delivery. Section 813 of the fiscal year 2017 National Defense Authorization Act requires DOD to amend its regulations to require contracting officers to consider specific criteria when deciding to use LPTA procedures. DOD has not yet revised its regulations to implement Section 813. Nevertheless, for the 7 contracts GAO reviewed, contracting officials' considerations when choosing to use LPTA procedures were often consistent with most of these new criteria. DOD officials are currently developing the revisions to the Defense Federal Acquisition Regulation Supplement that are contemplated by Section 813.