Analyzing the Effects of Source Selection Method, Acquisition Type, and Service Component on Acquisition Outcomes

Abstract

For years, one of the most hotly contested debates in contracting and acquisition has been the choice of source selection method and the contract-related consequences of that choice. While policy memos encourage contracting officers to ﾓselect the appropriate source selection process ﾅ to match the specific requirement, meet Warfighter needs, and deliver a contracted solution that will provide the required performance levels at the lowest costﾔ (Kendall, 2015, p. 3), stakeholders on both sides of the table have differing views about how the choice of source selection method affects contract outcomes. Anecdotally, from the perspective of the government, lowest priced technically acceptable (LPTA) procedures offer a faster time-to-contract, as the technical acceptability criteria is binary and the evaluation of priceﾗthe most important factor in LPTA source selectionsﾗis objective. Hence, theoretically, the requirement can be put on contract faster, with less likelihood of protest. The sellersﾒ perspective, however, is that the LPTA source selection method stifles innovation, because price is more important than, say, an innovative approach that may ultimately better serve the government (Calisti, 2015). Critics argue that the LPTA method often results in the selection of a contractor that has undercut the cost of the requirement. They argue that the contractor has essentially achieved ﾓbuy-inﾔ by proposing an unreasonably low price that will later have to be adjusted (i.e., increased) via modification in order to fulfill the terms and conditions of the contract. This sort of gamesmanship of the LPTA method has been the argument of federal contractors for many years. Further, opponents of the LPTA method believe the process represents a ﾓrace to the bottomﾔ price-wise, and mockingly dub the outcomes achieved by LPTA contracts as ﾓLousy Project, Tragic Actﾔ (Weckstein & Delgado, 2012). In other words, opponents feel LPTA source selections produce inferior products and services. Proponents suggest this is not the case, and that by providing clear technical acceptability criteria, the government can avoid receiving inferior products and services. On the opposite spectrum of the best value continuum, the tradeoff (TO) source selection method is anecdotally believed to take more time because of the subjective nature of the evaluation and the increased likelihood of protest. Customers and contractors alike seem to prefer this approach, as it allows customers to feel a certain measure of control over selecting the contractor that represents the best value to the governmentﾗthat by ranking the evaluation factors in terms of importance, they have the option of tailoring the evaluation to fully meet their needs. Contractors also seem to prefer this method, as it allows them to provide innovative solutions to government requirements, without the burden of competing mainly based on price. Proponents of the TO method argue that it results in higher quality products and services because contractors are not ﾓsqueezedﾔ on price. Opponents argue that the method does not necessarily produce better contractual outcomes (i.e., better contract performance), particularly given the anecdotal belief that TO acquisitions take longer to put on contract. Choosing which method is appropriate for a given acquisition is clearly established by policy and is not the focus of this research. Instead, we aim to use scientific methods to confirm or deny the anecdotal beliefs associated with each source selection method. We use multivariate analysis of variance (MANOVA) and multivariate analysis of covariance (MANCOVA) methods to determine if statistically significant differences in contract outcomes exist based on source selection method. This first-of-kind research uses actual contract file data from the Air Force and Navy to test hypotheses associated with the anecdotal beliefs. Specifically, we examine whether differences exist in Contractor Performance Assessment Reporting System (CPARS) scores and procurement administrative lead time (PALT) based on choice of source selection method (LPTA or TO), while taking into account several different covariates related to the acquisitions. The remainder of this paper proceeds as follows: The Literature Review section provides a detailed review of the contract management process, the best value continuum, and the relationship between contract type and source selection method. Following that is a discussion of the data collection and analysis methodologies, results of the analysis, and finally, a review of practical and managerial implications, as well as limitations and areas for further research.