The Great Misunderstanding of LPTA: What's Blocking Companies from Growing With it?

The famous author and poet CS Lewis once said, “Isn’t it funny how day by day nothing changes but when you look back, everything is different?” A look back to the past year, and everything is different in the Government Contracting landscape. SAIC, CSC, SRA, Lockheed, Sikorsky, and Leidos…this is just a short list of top companies transformed by mergers, divestitures, and acquisitions. The Government contracting industry, particularly the Defense Industrial Base, is shifting before our eyes. Market shaping deals aren’t necessarily new in this space, but they suddenly feel different, and you’re probably wondering why.

Many in the industry lament the Government’s use of the Lowest-Price Technically-Acceptable (LPTA) acquisition strategy. The combination of LPTA and budget cuts and shifts is an easy explanation for all that is wrong in the Government Contracting industry today. In reality, however, it isn’t that simple.

The Industry views LPTA as “the race to the bottom.” With increasingly fewer Defense programs to compete on, the downward spiral of pricing-to-win begins. While margins erode, the viability of each division - and the company itself, comes into question. The options of what to do for many comes down to whether to merge, divest, and/or acquire, but what if there was another more enduring, profitable, and most importantly--customer centric path?

In 2004 during the build up of Operations Iraqi Freedom and Enduring Freedom, the US Army’s Communications Electronics Command was challenged with deploying the Army’s core command and control systems to an ever-expanding user-base of Active, Guard, and Reserve units. The system, called the Army Battle Command System (ABCS), was in constant flux, with different components on different versions, and inconsistent capabilities deployed to Army/Guard/Reserve units. Something needed to happen. CECOM leadership called for a new approach, which they dubbed “Good Enough.” In short, they deemed the current system to be “Good Enough,” halted all future development, and deployed the most fully tested version so that all units/users operated off the same baseline. Speed of deployment of incremental capability deployed across the common platform was valued higher than waiting for all capabilities to be developed and then deployed. Once deployed, new contracts went to the systems integrators able to rapidly deliver the exact capability needed by field commanders and “Mission Owners” in incremental, short-burst initiatives which again went into the common baseline. This was touted as the Army's foray into Agile Development, which to this day, the Army, and the DoD at large covets for bringing innovative capability to its warfighters in a cost-effective manner.

So how does Agile and LPTA lead to success, especially within the Defense market? The answer is through: Acceleration and by achieving a shared belief.

Acceleration is the act of moving faster-faster, and is a key component in the equation commonly referred to as Newton’s Second Law, where Force (f) is a function of Mass (m) multiplied by Acceleration (a) (f=m*a). Translating this to business terms, to achieve `greater force or impact, the business must either increase the mass (resources) and/or accelerate those resources. Breaking the formula down further and focusing on acceleration (a=d/t2), the less time it takes (to deploy software; deliver a product, etc.), the more impact (force) the business has with its customers. Putting it all together, if a business reduces its resources (mass), but accelerates (by decreasing the amount of time it takes to perform the task), the force or impact of their work will be greater. This is the promise of Agile Development. If used in an LPTA bid, a contractor bidding less resources moving faster to complete the task will offer the lowest price and greatest impact to its customer. Simply stated, they’ll win in an LPTA competition, and delight their customers.

So what’s blocking many Government Contractors from adopting this approach to turn LPTA into an advantage? It’s the misalignment of shared beliefs with their customers, shareholders, managers, and employees.

As the author Simon Sinek says in his book, “Start with Why,” addressing the “golden circle” on why the company exists, and then the “how” the company does it, and last the “what” it does (which he calls an “Inside-Out” approach), brings clarity for all stakeholders. Shifting, for instance, from large, multi-year, big-bang implementations to quick, innovative, technology sprints (which is what the Government wants) is impossible without alignment. When a company’s shareholders evaluate success largely on the Total Contract Values of the programs won, it drives behavior and defines processes and systems which conflict with what the customer desires. It is not a trivial task to change business models to what the DoD/Government customers want. It means changing how shareholders view value; it means changing what employees are trained to do and how they are compensated; and it means changing corporate programs and systems to support redefined processes. As challenging as it may be, these changes are now necessities if these companies intend to remain and thrive in today’s Government Contracting market.

Secretary of Defense Ashton Carter is pushing the Better Buying Power 3.0 initiative which is reshaping the Defense Industrial Base. He is exceptionally vocal about his desire to tap into new veins of innovation and companies with expertise in agile development methodologies—untethered by the business models pervasive across the current Defense Industrial Complex. He is so committed to this he commissioned the Defense Innovation Unit-Experimental (DIUx) in Silicon Valley to seek out new partners for the DoD. Does this signal his lack of trust in the technologies and innovations from the DoD’s traditional providers? No, of course not. But with these actions he is unmistakingly showing his lack of confidence in the established industry’s ability to shift their legacy corporate business models to succeed in the DoD’s new reality.

So where does a company rooted with decades-old systems and processes, with employees and managers trained and motivated by yesterday’s methods, and with shareholders evaluating growth against measures no longer commensurate with a newly shifted industry begin? The starting point literally comes from within--from revisiting not what the company does, or how it does it, but by refocusing on why it exists in the first place--and then re-aligning with their customers into a shared belief. It’s the Age of the Customer, and it’s time for the Customer Success Platform. Colin Powell in his essay “The Company You Keep” says, “…if you associate with eagles, you will learn how to soar to great heights.” Who can you turn to for added lift to reach new heights?

At Salesforce we believe the business of business is improving the state of the world, and creating equality for all. We understand what it takes to compete and win in today's highly complex and increasingly more competitive Government Contracting market. That is why we built the most innovative sales, service, marketing, community, analytics, and applications with the highest trust, fastest customer growth and most enabled global team. We make software easier to purchase, simpler to use, and more democratic without the complexities of installation, maintenance, and constant upgrades. Our Customer Success Platform empowers every company, including Government Contractors, to connect to their customers, employees and shareholders in a whole new way.

Top contractors turn to Salesforce to elevate their business development efforts. Hear how PAE uses Salesforce GovCon Capture to manage customer relationships and drive pipeline. Mick Fox, VP of Business Development at PAE, shares PAE's success story.

About the Author

Bill Pessin has served the U.S. Public Sector, Aerospace, and high-technology market for the past 25 years. He leads a team of sales and engineering support professionals representing Salesforce’s complete portfolio to the Department of Defense, Intelligence Community, and the Defense Industrial Base. Before Salesforce, Bill was with Oracle, focused on complex enterprise application initiatives and infrastructure solutions in the DoD, and SAP, focused on large system integration programs across the Federal Government. Bill is also a U.S Army Veteran serving in the Army and Army Reserve as a Transportation Officer