Source Selection Procedures Update for the Procurement Division of the National Defense Industrial Association October 12, 2016 1/2/2019

Overview Purpose Background Document Structure Major Changes Applicability and Waivers Best Value Continuum LPTA Subjective Tradeoff VATEP VATEP Example 1/2/2019

A Guide to Help You Think Purpose Provides the DoD procedures for conducting competitively negotiated source selections a.k.a A Guide to Help You Think 1/2/2019

Background Updates March 2011 Source Selection Procedures (SSP) to incorporate Better Buying Power initiatives Better define value in “best value” competitions When Lowest Price Technically Acceptable (LPTA) is used, define Technically Acceptable to ensure needed quality Encourage industry participation Decision made to review entire document Reviewed by USD(AT&L), DoD OGC, Service representatives, PEO/PM Focus Group, other Defense Agencies, DARS 1/2/2019

Document Structure Chapter 1 – Purpose, Roles, and Responsibilities Applicability Waivers Best Value Continuum Source Selection Team Roles and Responsibilities Chapter 2 – Pre-Solicitation Activities Peer Reviews and Market Research Source Selection Plan Develop Request for Proposals Chapter 3 – Evaluation and Decision Process Evaluation Activities Documentation of Initial Evaluation Results Award without Discussions Competitive Range Decision Document Discussion Process Documentation of Final Evaluation Results Best Value Decision Source Selection Decision Document Debriefings Integrating Proposal into Contract Chapter 4 – Documentation Requirements Chapter 5 – Definitions Appendix A – Debriefing Guide Appendix B – Tradeoff SSP Appendix C – LPTA SSP 1/2/2019

Major Changes Adds appendix on Tradeoff Source Selection Process Refines technical acceptability criteria when using LPTA Includes best practices obtained through peer reviews Encourages hybrid and tailored source selections “There is simply no end to the level of complexity we are willing to drive into any source selection.” --Richard Ginman 1/2/2019

Major Changes (Cont’d) Modifies Rating Methodologies within FAR constraints “Strengths” applicable to evaluation of technical approach, not risk “Weaknesses” applicable to evaluation of risk, not technical approach Better defines descriptions of adjectival ratings Reduces redundancy Easier for evaluators to distinguish between ratings 1/2/2019

Major Changes (Cont’d) PREVIOUS RATINGS Table 2. Technical Ratings (Separate) Color Rating Description Blue Outstanding Proposal meets requirements and indicates an exceptional approach and understanding of the requirements. The proposal contains multiple strengths and no deficiencies. Purple Good Proposal meets requirements and indicates a thorough approach and understanding of the requirements. Proposal contains at least one strength and no deficiencies. Green Acceptable Proposal meets requirements and indicates an adequate approach and understanding of the requirements. Proposal has no strengths or deficiencies. Yellow Marginal Proposal does not clearly meet requirements and has not demonstrated an adequate approach and understanding of the requirements. Red Unacceptable Proposal does not meet requirements and contains one or more deficiencies and is unawardable. UPDATED RATINGS Table 2A. Technical Rating Method Color Rating Adjectival Rating Description Blue Outstanding Proposal indicates an exceptional approach and understanding of the requirements and contains multiple strengths. Purple Good Proposal indicates a thorough approach and understanding of the requirements and contains at least one strength. Green Acceptable Proposal indicates an adequate approach and understanding of the requirements. Yellow Marginal Proposal has not demonstrated an adequate approach and understanding of the requirements. Red Unacceptable Proposal does not meet requirements of the solicitation and, thus, contains one or more deficiencies and is unawardable. 1/2/2019

Major Changes (Cont’d) PREVIOUS RATINGS REQUIRED FOR SEPARATE TECHNICAL/RISK EVALUATION Table 3. Technical Risk Ratings Rating Description Low Has little potential to cause disruption of schedule, increased cost or degradation of performance. Normal contractor effort and normal Government monitoring will likely be able to overcome any difficulties. Moderate Can potentially cause disruption of schedule, increased cost or degradation of performance. Special contractor emphasis and close Government monitoring will likely be able to overcome difficulties. High Is likely to cause significant disruption of schedule, increased cost or degradation of performance. Is unlikely to overcome any difficulties, even with special contractor emphasis and close Government monitoring. UPDATED RATINGS REQUIRED FOR SEPARATE OR COMBINED TECHNICAL/RISK FACTORS. Table 2B. Technical Risk Rating Methods Adjectival Rating Description Low Proposal may contain weakness(es) which have little potential to cause disruption of schedule, increased cost or degradation of performance. Normal contractor effort and normal Government monitoring will likely be able to overcome any difficulties. Moderate Proposal contains a significant weakness or combination of weaknesses which may potentially cause disruption of schedule, increased cost or degradation of performance. Special contractor emphasis and close Government monitoring will likely be able to overcome difficulties. High Proposal contains a significant weakness or combination of weaknesses which is likely to cause significant disruption of schedule, increased cost or degradation of performance. Is unlikely to overcome any difficulties, even with special contractor emphasis and close Government monitoring. Unacceptable Proposal contains a material failure or a combination of significant weaknesses that increases the risk of unsuccessful performance to an unacceptable level. 1/2/2019

Major Changes (Cont’d) PREVIOUS RATINGS Table 1. Combined Technical/Risk Ratings Color Rating Description Blue Outstanding Proposal meets requirements and indicates an exceptional approach and understanding of the requirements. Strengths far outweigh any weaknesses. Risk of unsuccessful performance is very low. Purple Good Proposal meets requirements and indicates a thorough approach and understanding of the requirements. Proposal contains strengths which outweigh any weaknesses. Risk of unsuccessful performance is low. Green Acceptable Proposal meets requirements and indicates an adequate approach and understanding of the requirements. Strengths and weaknesses are offsetting or will have little or no impact on contract performance. Risk of unsuccessful performance is no worse than moderate. Yellow Marginal Proposal does not clearly meet requirements and has not demonstrated an adequate approach and understanding of the requirements. The proposal has one or more weaknesses which are not offset by strengths. Risk of unsuccessful performance is high. Red Unacceptable Proposal does not meet requirements and contains one or more deficiencies. Proposal is unawardable. UPDATED RATINGS Table 3. Combined Technical/Risk Rating Method Color Rating Adjectival Description Blue Outstanding Proposal indicates an exceptional approach and understanding of the requirements and contains multiple strengths, and risk of unsuccessful performance is low. Purple Good Proposal indicates a thorough approach and understanding of the requirements and contains at least one strength, and risk of unsuccessful performance is low to moderate. Green Acceptable Proposal meets requirements and indicates an adequate approach and understanding of the requirements, and risk of unsuccessful performance is no worse than moderate. Yellow Marginal Proposal has not demonstrated an adequate approach and understanding of the requirements, and/or risk of unsuccessful performance is high. Red Unacceptable Proposal does not meet requirements of the solicitation, and thus, contains one or more deficiencies, and/or risk of unsuccessful performance is unacceptable. Proposal is unawardable. 1/2/2019

Major Changes (Cont’d) Expands discussion of Source Selection Team (SST) Roles and Responsibilities Adds/Expands roles of legal counsel, program manager, and requirements owner Adds Small Business ratings table if Acceptable/Unacceptable rating is not used Updates statutory and regulatory references Updates/adds definitions 1/2/2019

Applicability and Waivers All acquisitions Conducted as part of a Major Systems Acquisition Program Competitively negotiated FAR Part 15 with est. value > $10M 1/2/2019

Applicability and Waivers (Cont’d) Applicability (Continued) Exceptions FAR subpart 8.4 FAR Part 12 Only if Part 12 is used solely in conjunction with parts 13 and 14, and Not used with FAR subpart 15.3 FAR Parts 13 and 14 FAR subpart 16.505(b)(1), Orders under MACs—fair opportunity (recommended for orders > $10M) FAR subpart 35.016, BAA FAR subpart 36.6, A&E services, and 15 USC, Section 638, to solicit and award SBIR, SBTTR, and SBTT acquisitions 1/2/2019

Applicability and Waivers (Cont’d) Greater than $1B - written approval by Director, Defense Procurement and Acquisition Policy Less than $1B – written approval by Services Procurement Executive (SPE) SPE may set lower internal dollar thresholds as appropriate 1/2/2019

Best Value Continuum Low Price Greater Relative Importance of Cost or Price Lesser Lesser Importance of Non-Cost Factors Greater Lowest Price Technically Acceptable (LPTA) Source Selection Process DoD Source Selection Procedures, Appendix C Tradeoff Source Selection Process described in DoD Source Selection Procedures, including Appendix B Mix and match tradeoffs: Low Price Technical Technical Risk Past Performance Cost or Price Non–Cost Factors Small Business Participation Cost/Price 1/2/2019

Best Value Continuum (Cont’d) SSP describes processes and techniques to design acquisition strategies suitable for specific circumstances, including: LPTA Tradeoff Subjective tradeoff Value Adjusted Total Evaluated Price (VATEP) with monetized adjustments Carefully consider and use the approach that is most appropriate for the acquisition These are not the only source selection processes available on the best value continuum 1/2/2019

Best Value Continuum (Cont’d) Limit evaluation criteria to critical user requirements regardless of source selection process used Clearly state requirements Consider use of a compliance matrix with clear, objective requirements Consider use of hybrid processes / tailoring (“Acceptable/Unacceptable” evaluation for non-critical requirements) 1/2/2019

LPTA Use for commercial or non-complex supplies or services Best value expected to result from selection of technically acceptable proposal with lowest cost No additional value placed on a supply or service exceeding the Government’s threshold (minimum requirements) 1/2/2019

LPTA (Cont’d) Appropriate for Well-defined requirements Minimal risk of unsuccessful performance No value, need, or willingness to pay for higher performance All factors other than cost or price are evaluated on an “Acceptable” or “Unacceptable” basis Source Selection Plan must clearly describe minimum requirements used to determine technical acceptability 1/2/2019

Subjective Tradeoff Relative importance of all evaluation factors and significant subfactors identified in RFP SSA must consider cost and risk of selecting one proposal over another, consistent with evaluation criteria Analysis must be meticulously and fully documented in the Source Selection Decision Document Appropriate when placing a quantifiable value on performance above threshold is not in Government’s best interest. 1/2/2019

VATEP Monetizes different levels of performance corresponding to threshold (minimum) and objective (maximum) performance/capabilities for “valued requirements” Must consider impact on affordability Establish affordability cap over which an offeror may not be eligible for award VATEP is merely a structured technique for objectivizing how some (or all) of the requirements would be treated in the tradeoff process and then communicating that to offerors in the RFP 1/2/2019

VATEP (Cont’d) Awarded contract must reflect all above-minimum performance/capability levels for which evaluation credit was given Applies to all tradeoff processes, not just VATEP Can be used in conjunction with any source selection process Can combine objective criteria (Acceptable/Unacceptable), subjective criteria (color/adjectival ratings), and valued requirements with associated downward TEP adjustment 1/2/2019

VATEP (Cont’d) RFP identifies percentage or dollar amount assigned to valued requirements Allows offeror to determine if additional cost of offering better performance will improve their competitive position No extra credit for exceeding objective (maximum) Assigns a monetary value to higher rated technical attributes, removing some subjectivity from evaluation Downward TEP adjustment is for evaluation purposes only Contract is awarded at Total Proposed Price Offerors must propose to meet all minimum requirements to be eligible for award 1/2/2019

VATEP (Cont’d) Requiring Office needs to define the value of higher performance/capability Which above threshold requirements are truly of substantial benefit? How are they valued relative to each other in absolute terms (dollar value or percentage)? Consider operational benefit, risk, and affordability which may warrant a potentially higher price 1/2/2019

Price is what you pay. Value is what you get. VATEP (Cont’d) Not every requirement can/should be monetized Must understand and determine which requirements are truly discriminators Limited number of valued requirements to ensure inclusion of only highly valued performance/capabilities RFP should Clearly state that non-monetized factors will be evaluated based on relative importance to other factors in accordance with the RFP Address treatment of incremental solutions Price is what you pay. Value is what you get. —Warren Buffett 1/2/2019

VATEP (Cont’d) Procedures Step 1 – Determine acceptability of proposal and establish competitive range (or award without discussions) Step 2 - Determine if proposal meets any valued requirements. If so, adjust TPP for each valued requirement in accordance with RFP. TPP less all adjustments = Total Evaluated Price (TEP) TEP used for evaluation purposes only Step 3 – Award to the offeror whose proposal represents the best value based on evaluation criteria set forth in the RFP Contract awarded at offeror’s final TPP, not TEP 1/2/2019

VATEP Example RFP identifies two valued requirements and affordability cap: Range (minimum/threshold is 200 nm, maximum/objective is 225 nm); valued up to $20 Risk (minimum/threshold is Moderate risk rating, maximum/objective is Low risk rating); valued up to $20 Affordability cap is $1300 Offeror A: Acceptable for all minimum requirements; TPP is $1000 Offeror B: Acceptable for all minimum requirements; TPP is $990 Offeror C: Acceptable for all minimum requirements; TPP is $1015 Offeror D: Unacceptable for one minimum requirement; TPP is $975. Not in competitive range Offeror E: Acceptable for all minimum requirements; TPP is $1350 and above the affordability cap. Not in competitive range 1/2/2019

VATEP Example Offeror A: TPP $1,000; proposal meets maximum for valued requirement for range ($20 adjustment) $1,000 - $20 = $980 TEP Offeror B: TPP $990; proposal meets maximum for valued requirement for risk ($20) $990 - $20 = $970 TEP Offeror C: TPP $1015; proposal meets maximum for valued requirements for range ($20) and risk ($20) $1015 - $20 - $20 = $975 TEP SSA awards to the offeror whose proposal represents the best value to the Government based on evaluation criteria set forth in RFP 1/2/2019

The bitterness of poor quality remains long after the sweetness of low price is forgotten. —Benjamin Franklin 1/2/2019