We wrote recently here about the US government “lowest cost technically acceptable” (LCTA) policy, that requires an organisation to choose the lowest cost tender from potential providers that meets the basic requirements defined by the buyer.
It seems to be becoming less popular, but as said in the previous article, it does highlight a couple of interesting and quite challenging issues for public sector buyers. The first is linked to the whole issue of “value”, how it is defined and measured – and evaluated in tenders. The logic for not accepting the lowest cost tender – or the lowest cost acceptable tender – is that non-cost factors in a bidder’s proposal can add real value to that proposal and make it the “best” selection for the buyer to make.
So we look at a proposal for software and assess that some of the additional features of one supplier’s proposal add value that makes it worth paying an additional amount of money over and above a more basic proposal. That may be true even if the basic proposal meets all the stated needs in the tender documentation. It may be that the buyer did not realise such features were available, or assesses that the additional featured will bring real benefits to users.
