Federal Transportation Officer Training Program: Intermediate (Level 2)

Transcription

1 Page 1 of 31 Federal Officer Training Program: Intermediate (Level 2) Session 1: Determining Best Value in Page 1 of 31

2 Page 2 of 31 Session Objectives Upon completing this session given the sample cases and questions in the Knowledge Review section, you will be able to: Identify factors to consider in making a best value transportation selection. Determine the most appropriate selection strategy, whether lowest-price-technically acceptable, best value, or a combination of both. Select the transportation service provider (TSP) using the most appropriate best value transportation strategy. Page 2 of 31

3 Page 3 of 31 Session Outline What Is Best Value? Why Should I Consider Best Value? Does My Agency Have Established Best Value Requirements? Can Shipment Characteristics and Requirements Impact Best Value? What Mode Variables Might Affect Best Value? What Are Possible Best Value Factors? What Is the Best Value Continuum? What Are Types of Best Value Selection Strategies? Wrap Up Glossary of Terms Knowledge Review Continuing the Learning Process Page 3 of 31

4 Page 4 of 31 What Is Best Value? The purpose of this session is to introduce the concept of determining best value in transportation and begins by asking "What is Best Value?" Best value is the concept of evaluating a decision based on multiple factors and selecting a solution based on the most attractive combination of those factors to meet your agency's mission and requirements. Federal Acquisition Regulation (FAR):"Best value means the expected outcome of an acquisition that, in the government's estimation, provides the greatest overall benefit in response to the requirement" (48 CFR 2.101(2012)) Federal Management Regulation (FMR): "Best value to your agency when routing a shipment means using the mode or individual TSP that provides satisfactory service with the best combination of service factors and price that meets the agency's requirements. A lower price may not be the best value if the service offered fails to meet the requirements of the shipment" (41 CFR (2012)). Page 4 of 31

5 Page 5 of 31 What is an example of best value in transportation? Your agency needs to move an historic artifact from Washington, DC, to Denver, Colorado, for a week-long public exhibit that will open on a Thursday at 5:00 pm. The artifact will need to be uncrated and carefully setup in Denver, which will estimated to take between 2 and 4 hours. The earliest you can ship the artifact is early Monday morning. Your research shows you can ship the artifact by less-than-truckload (LTL) for $850 to arrive at 2:00 pm on Thursday, which allows 3 hours for setup. While within the window of adequate setup time, you research alternatives to get the shipment there to allow 4 hours. You find you can ship the artifact by air freight for $1,460 arriving at 11:00 am on Thursday, allowing 6 hours of setup time. Both carriers have a history of good reliability and low damage. Which is best value for your agency? Do you get it there by 11:00 am on the third day using air freight and allowing adequate time for setup? Or do you save $610 dollars and use the less-expensive LTL option, which provides only 3 hours of setup time? Page 5 of 31

6 Page 6 of 31 Why Should I Consider Best Value? When acquiring goods and services, federal agencies must consider best value in their determination. The federal procurement reform initiative, Executive Order (EO) 12931, Federal Procurement Reform, October 13, 1994, 1(d), states: " to increase the use of commercially available items where practical, place more emphasis on past contractor performance, and promote best value rather than simply low cost in selecting sources for supplies and services." Page 6 of 31

7 Page 7 of 31 Why Should I Consider Best Value? (continued) The Office of Federal Procurement Policy website explains: "Today more than ever, the government must ensure that it spends money wisely and eliminates waste and abuse of taxpayer dollars. With more than one out of every six dollars of Federal government spending going to contractors, it is imperative that contract actions result in the best value for the taxpayer." Acquisition.gov step six in their seven step process to performance-based service acquisition selects the right contractor using best value and source selection. "Best value" is a process used to select the most advantageous offer by evaluating and comparing factors in addition to cost or price. It allows flexibility in selection through tradeoffs which the agency makes between the cost and non-cost evaluation factors with the intent of awarding to the contractor that will give the government the greatest or best value for its money. Page 7 of 31

8 Page 8 of 31 Does My Agency Have Established Best Value Requirements? Most government agencies will have specific guidelines for acquisition processes, and some may be unique to procuring transportation services. Many factors go into determining the best alternatives for supporting a shipment, and a best value decision cannot be made before the shipment planning processes are completed. It is important that you understand your agency's best value requirements. However, the transportation officer (TO) must understand the agency's operating environment and established approach to selecting a mode or transportation service provider (TSP). Listed below are some best value considerations, but you should always refer to your own agency policies: If your agency has rules and restrictions for shipping, does the commodity you are shipping fall within these rules and restrictions? They may be sitespecific also, so does the site you are shipping to or from have restrictions for you to consider? If your agency has contracts with TSPs or tenders, are you required to use them? Page 8 of 31

9 Page 9 of 31 Can Shipment Characteristics and Requirements Impact Best Value? Special requirements to support unique shipments may indirectly affect your best value decision. The requirements will have the impact of refining your choices of modes, and the TSPs within the modes that can adequately support your requirements. As you begin the selection process, you may determine that a mode and TSP combination comes closest to meeting your overall needs, at a given price. For these decisions, the ability to support the specialized requirement may outweigh price, thus pointing to a best value decision. Shipment characteristics can drive mode, TSP selection, routing, assessorial requirements, and other elements of cost. These shipment characteristics may include the following: High-value, security risk, hazardous, perishable, or fragile and require special handling (such as air-ride trailer, protective services, signature service, refrigeration, or temperature control). Outsized, overweight, and special packaging that may require special routing, special equipment, or TSPs with specialized capabilities. Mission-specific requirements associated with the shipment can also drive mode, TSP selection, routing, assessorial requirements, and other elements of costs, and may include the following: Delivery timeline Destinations Page 9 of 31

10 Page 10 of 31 What Mode Variables Might Affect Best Value? Identifying the mode characteristics can also drive the selection of a best value choice. The table below illustrates different modes have different performance variables to consider in choosing the best value. These modes may differ internationally. Mode Speed Accessibility Cost Capacity Intermodal Capability Environmentally Sound Modes Motor Moderate High Moderate Low High Low Railroad Slow Moderate Low Moderate High High Air Fast Moderate High Low Moderate Low Water Slow Low Low High High High Page 10 of 31

11 Page 11 of 31 What is an example of how mode variables might affect best value? Air provides a fast delivery speed at a very high cost when compared to the other modes, while water provides a very slow delivery speed, but at a very low cost. Therefore, if your delivery time is short, the more expensive air alternative could be your best value choice. Page 11 of 31

12 Page 12 of 31 What Are Possible Best Value Factors? In accordance with the Federal Acquisition Regulation (FAR) 48 CFR 8.4(2012), ordering activities should place orders based on best value. Most of the discussions about best value in this reference focus on selection of items or services in general, and many of the best value considerations listed do not directly apply to transportation services. Some key best value factors to consider during evaluation of transportation service options include the following: Past performance How has this provider met your needs in the past? Liability Cover What is the cargo valued at so it can be covered in the rate? Special requirements What is the capability of the provider to supply unique services required for the shipment to occur? Delivery terms What is the delivery timeframe promised by the provider? Price What is the base price quoted by the provider; are additional costs noted? Seasonality What does shipping at different times of the year affect? Page 12 of 31

13 Page 13 of 31 What Is the Best Value Continuum? Although price is always important, service or technical approach (how a service provider approaches the requirements) may have an equal or higher level of importance in the selection process. This gamut from a pure-price evaluation to considering only the technical factors of a proposal is known as the Best Value Continuum. An agency can obtain best value in negotiated acquisitions by using any one or a combination of source selection approaches. In different types of acquisitions, the relative importance of price may vary. For example, when the requirement is clearly definable and the risk of unsuccessful provider performance is minimal, price may play a dominant role in selecting the best value solution. The less definitive the requirement, the more development work is required and the greater the performance risk, the more technical or past performance considerations may have a dominant role in the selection process. Source: General Services Administration (GSA), Using Multiple Award Schedules: Student Guide Page 13 of 31

14 Page 14 of 31 What Is the Best Value Continuum? (continued) The Best Value Continuum recognizes that a best value determination may involve one or a combination of selection strategies. In addition, the acquisition should be tailored to the requirement. At one end of this continuum, price plays a dominant role in selecting the transportation solution. At the other end of the continuum, price, past performance, and technical considerations are prioritized to identify the choice that provides the government with the best value. Additional guidance is provided in Federal Acquisition Regulation (FAR) 48 CFR (2012). Page 14 of 31

15 Page 15 of 31 What Are Types of Best Value Selection Strategies? This section of Session 1 Determining Best Value in will review the question "What are Types of Best Value Selection Strategies" by exploring the following areas: What is the tradeoff process strategy? How do I conduct a tradeoff analysis? What is the lowest price technically acceptable strategy (LPTA)? Can I use a combination of the tradeoff and LPTA strategies? An agency may use any one or a combination of selection strategies along the Best Value Continuum to obtain the best value solution. The two most common selection strategies are listed below: 1. Tradeoff process strategy 2. Lowest price technically acceptable (LPTA) strategy Page 15 of 31

16 Page 16 of 31 What is the tradeoff process strategy? The tradeoff process strategy is used a lot in government procurements not just for transportation; and is applied in both contract and tender acquisitions. The tradeoff process is described in FAR 48 CFR (2012). This process allows tradeoffs among noncost factors, such as technical approach, past performance, and cost, when determining best value to the government. The tradeoffs give the government the latitude to award a contract to other than the lowest priced offeror when the tradeoffs show there is additional value to the government in these factors. The strengths and weaknesses, risks, prices, or probable costs must be compared to identify the combination that represents the best value under the applicable evaluation criteria. Emphasis should be placed on those key criteria that distinguish between acceptable and outstanding performance. This strategy requires the transportation officer to conduct a tradeoff analysis, determining the factors to be considered and their relative weights. Page 16 of 31

17 Page 17 of 31 How do I conduct a tradeoff analysis? The steps below show how the TO identifies and prioritizes selected criteria and assigns a quantitative value to each alternative being considered. The TO compares the quantitative differences among competing alternatives and determines the best value transportation alternative. 1. Define the requirement 2. Identify best value criteria 3. Prioritize criteria 4. Identify transportation alternatives 5. Gather data on each alternative 6. Rate each alternative based on best value criteria 7. Choose mode and TSP Page 17 of 31

18 Page 18 of 31 What is an example of a tradeoff analysis? The earlier example of shipping an historic artifact can be used to demonstrate a tradeoff analysis. The requirement is to ship an artifact from Washington, DC, to Denver, Colorado, for display in a public exhibit. The exhibit will open on a Thursday at 5:00 pm, and the setup of the display requires 2 to 4 hours. You identified two mode alternatives the first is an LTL motor carrier TSP and the second is air freight TSP. From your research, you found that LTL will cost $610 less than air freight. However, the TSP's promised delivery allows only 3 hours of setup time. Although more expensive, the air freight option allows 6 hours of set-up time. While the LTL carrier's 3 hours of setup time is within the required window, a review of the TSP's past performance shows that the TSP has delivered several hours late during the past year. Because it is critical to be ready for the show opening, the TO considers the tight timeframe for LTL delivery and TSP performance risk in the tradeoff analysis, and concludes that the air freight TSP option is the best value and the extra $610 in air freight cost is warranted. Page 18 of 31

19 Page 19 of 31 What is the lowest price technically acceptable strategy (LPTA)? The Lowest Price Technically Acceptable (LPTA) strategy and process is defined in Federal Acquisition Regulations 48 CFR (2012). The lowest price technically acceptable source selection process is appropriate when best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price. The LPTA strategy is normally applied when the requirement is generally not complex, and the technical and performance risks are minimal. However, the transportation officer still needs to determine what service is required and what level of performance is acceptable. Page 19 of 31

20 Page 20 of 31 What is an example of an LPTA? In the previous example if setup time for the artifacts were not an issue, the transportation officer could use the LPTA process instead of the tradeoff process, as long as the set of TSPs could accomplish the delivery by the specified day and time and had acceptable performance records. The transportation officer would have selected the lowest-price technically acceptable TSP. Page 20 of 31

21 Page 21 of 31 Can I use a combination of the tradeoff and LPTA strategies? There may be instances when a combination of the tradeoff and LPTA strategies would be the best approach for your agency and the shipment. What is an example? A request for proposal could state that only offers that meet the delivery terms will be considered for award. The TO evaluates offers as pass or fail based on their meeting the delivery terms and then performs a tradeoff analysis of cost and the remaining non-cost factors to determine the best value selection. Incorporating a change in the artifact shipment example, assume that setup time is not an issue and the TO has offers from one air freight TSP and two LTL TSPs. All have promised delivery within the specified timeframe. The air freight offer is much higher than the two LTL offers, which are within a few dollars of each other. By using a combination approach, the TO could first eliminate the air freight offer based solely on the price, leaving the two LTL TSP offers to consider. One has a slightly lower price, but less reliable past performance. The other has a good performance record, but slightly higher price. Based on weighted selection criteria, the TO awards the shipment to the more reliable, but higher priced LTL carrier. Page 21 of 31

22 Page 22 of 31 Wrap Up In this session on determining best value in transportation, you have been introduced to: Best value is the concept of evaluating a decision using multiple factors and selecting a solution based on the most attractive combination of these factors to meet your agency's mission and requirements. "Best value to your agency when routing a shipment means using the mode or individual transportation service provider (TSP) that provides satisfactory service with the best combination of service factors and price that meets the agency's requirements. A lower price may not be the best value if the service offered fails to meet the requirements of the shipment" (41 CFR (2012)). Executive Order 12931, Federal Procurement Reform, October 13, 1994, 1 (d), requires more emphasis on past contractor performance, and promotes best value rather than simply low cost in selecting sources for supplies and services. The transportation officer must understand the agency's operating environment and established approach to selecting a mode or a transportation service provider, and whether the agency has contracts with TSPs or tenders that you are required to use. The TO must also understand the agency's best value requirements. Special requirements will have an impact on refining your choices of modes and the TSPs within the modes that can adequately support your requirements. You may conclude that a particular mode and TSP combination comes closest to meeting your overall needs at a given price. For these decisions, the ability to support the specialized requirement may outweigh price, thus pointing to a best value decision. Different modes have different performance variables to consider in choosing the best value mode. For example, air provides for fast delivery at a high cost and less fuel efficient when compared to other modes while water provides for slow delivery at a very low cost. Therefore, if your delivery time is very short, the more expensive air alternative may be your best value choice. These modes may differ internationally. Page 22 of 31

23 Page 23 of 31 Wrap Up (continued) Some key best value factors to consider during evaluation of transportation service options include the following: Past performance How has this provider met your needs in the past? Liability Cover What is the cargo valued at so it can be covered in the rate? Special requirements What is the capability of the provider to supply unique services required for the shipment to occur? Delivery terms What is the delivery timeframe promised by the provider? Price What is the base price quoted by the provider; are additional costs noted? Seasonality What does shipping at different times of the year affect? Page 23 of 31

24 Page 24 of 31 Wrap Up (continued) The importance of price may vary based on the requirement. For example, where the requirement is clearly definable and the risk of unsuccessful provider performance is minimal, price may have the dominant role in selecting the best value solution. The less definitive the requirement, the more development work required, or the greater the performance risk, the more technical or past performance considerations may have a dominant role in the selection process. This gamut from a pure-price evaluation to considering only the technical factors of a proposal is known as the Best Value Continuum. An agency can use any one or a combination of strategies along the best value continuum to obtain best value: The tradeoff process strategy is the act of evaluating the two ends of the Best Value Continuum and trading off various price and technical performance factors to come to a balanced selection between price and technical performance. The LPTA strategy places greater emphasis on lowest-cost options, as long as the TSPs meet minimal technical standards for providing the required services. You may combine the LPTA and tradeoff strategies to: Evaluate the alternatives technically on a pass or fail basis, then base the final selection decision using tradeoff between past performance and price. Evaluate the alternatives based on lowest price first, and then base the final selection on any equal price offers using tradeoff between past performance and other non-price factors. Page 24 of 31

25 Page 25 of 31 Glossary of Terms Best value: When routing a shipment, best value means using the mode or individual TSP that provides, at a minimum, satisfactory service and the best combination of service factors and price that meets the agency's requirements. A lower price may not be the best value if the service offered fails to meet the requirements of the shipment. (41 CFR ) Best value continuum: The continuum represents a variety of options that may be used solely or in combination to make a best value determination. At one end of this continuum is the "lowest price, technically acceptable" strategy where price predominates as a selection criterion. At the other end is the high price, technically superior strategy whereby a tradeoff among price, past performance, and other technical considerations (to include services offered) is used to identify the transportation solution. (48 CFR ) Tradeoff process: This strategy determines selection criteria and their relative importance, and then makes tradeoffs among price and non-cost factors to determine the best value solution. This strategy allows the government to evaluate possible options for more-complex requirements and select the best solution using factors other than lowest cost. (48 CFR ) Lowest price technically acceptable (LPTA): This strategy is used where best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price. (48 CFR ) Page 25 of 31

26 Page 26 of 31 Knowledge Review Select the correct response: What is the first thing you need to understand when selecting best value transportation services? A. Shipment characteristics and requirements B. How to conduct a tradeoff analysis C. Your agency's operating environment, rules, requirements, and guidelines D. Best Value Continuum Answer: C - Your agency's operating environment, rules, regulations, and guidelines. Feedback: Before making best value decisions, you need to understand your agency's operating environment and any established approach to selecting a mode or TSP and whether your agency has contracts with TSPs or tenders that you are required to use. You must also understand your agency's best value requirements. With that understanding, you can then apply these factors to your shipping requirement to make a best value transportation selection. Page 26 of 31

27 Page 27 of 31 Knowledge Review Based upon the following scenario select the correct response(s): You have received a short notice, critical requirement to ship large crates from your agency in the Washington, DC area to another agency in Mechanicsburg, Pennsylvania. Because the destination has no loading dock, the TSP needs to provide lift gate service. It is Tuesday morning and the other agency needs to receive these crates by noon on Thursday. You are aware that it is the busy season for TSPs so you offer your shipment to 12 TSPs that service your region. You receive 5 responses; all offers are within $45.00 of each other, one offer includes lift gate service as part of the base rate. Three of the five responding TSPs have handled shipments for you in the past. Two promise delivery by 5 pm on Thursday, the others promise delivery by noon on Thursday. Select the following factor(s) you should consider in making a best value transportation selection for this shipment: A. Past performance B. Price C. Planned route D. Delivery terms E. Special Requirements F. Previous deliveries to the destination agency Page 27 of 31

28 Page 28 of 31 Answer: A. Past Performance, B. Price, D. Delivery Terms, E. Special Requirements Feedback: The planned route of each responding TSP to Mechanicsburg is immaterial to your best value selection. You will hold the TSP responsible for its overall performance. While it might be helpful to a TSP if it has made previous deliveries to the destination agency, unless the destination is very difficult to find or has unusual entry requirements, it is not a factor in your best value selection. Three of the five respondents have handled shipments for you in the past. Questions you need to ask: Have these TSPs accepted shipments when offered? When they accept shipments, do they follow through with on-time pickup and delivery? The range of base rate offers is narrow and one has included lift gate service in its base rate. What will the other TSPs charge to satisfy your special requirement for lift gate service? This assessorial charge could make a significant difference in the range of total prices being offered. Two of the five responding TSPs provide delivery terms of 5 pm on Thursday that will not meet your requirement. Your best value selection should be the TSP that has the lowest total price (combination of base rate and lift gate assessorial charge) from among those that will deliver by noon on Thursday and have satisfactory past performance. Page 28 of 31

29 Page 29 of 31 Knowledge Review Based upon the following scenario select the correct response: Your agency needs to move monthly shipments of four truckloads each from a warehouse in Kansas City to a warehouse in San Diego for an undetermined period of time starting on August 1. The shipments must arrive two days after loading. There are no special requirements. You request bids and receive 10 offers with a wide range in prices. All 10 TSPs have moved shipments for you during the past year and with satisfactory performance. All indicate that they can provide four trucks each month starting August 1 and they understand and will meet the delivery terms. Which of the following is the most appropriate best value transportation selection strategy to use? A. Tradeoff process B. Lowest price technically acceptable C. A combination approach that combines both A and B Answer: B. Lowest price technically acceptable Feedback:The factors you should consider in making a "best value transportation selection" include: Past performance Price Delivery terms, and Special requirements. All offers have satisfactory past performance, indicate that they understand and will meet the delivery terms, and cite no special requirements. They are all technically acceptable. These offers differ only by price. Therefore, the lowest price technically acceptable is the most appropriate transportation selection strategy to use. Page 29 of 31

30 Page 30 of 31 Knowledge Review Based upon the following scenario select the correct response: You have a requirement to ship fragile items from St. Louis to Los Angeles. Because the delivery site is located in downtown Los Angeles, afternoon rush-hour traffic makes arriving and departing after 3 pm extremely difficult and time consuming. As a result, the loading dock closes at 3 pm. You conclude it will take one hour to unload and make inside delivery of your items. The shipment will be available for pickup in St. Louis on Monday morning and needs to be delivered by 2 pm on Thursday. You identified two mode alternatives one is an LTL motor carrier and the other is air freight. From your research, you find that LTL will cost $585 less than air freight. However, the TSP's promised delivery allows only one hour to unload and make an inside delivery prior to the loading dock closing. Although more expensive, the air freight option allows three hours for unloading and an inside delivery. While the LTL carrier's delivery time allows the one hour needed for unloading and an inside deliver, a review of the TSP's past performance shows that the TSP has delivered several hours late during the past year. A similar review of the air freight TSP shows a record of satisfactory performance. Apply the tradeoff process and determine the best TSP to use for this shipment using timeframe for deliver, TSP performance risk, and price. A. LTL TSP B. Air Freight TSP Answer: B. Air Freight TSP Feedback:Various price and technical performance factors must be compared in order to decide what combination represents the best value. This requires the transportation officer complete a tradeoff analysis, determining the factors to be considered and their relative weights. The benefits of a higher-priced alternative should merit the additional cost. In this simple example, the weights of all the factors are equal. In terms of price, the LTL will cost $585 less than air freight. While the LTL carrier's delivery time allows the one hour needed for unloading and an inside delivery, a review of the TSP's past performance shows that the TSP has delivered several hours late during the past year. The air freight option allows two additional hours for unloading and an inside delivery than the one hour needed. A similar review of the air freight TSP shows a record of satisfactory performance. Given the risk of missing the required delivery time, the higher price for air freight merits the additional cost. Page 30 of 31

31 Page 31 of 31 Continuing the Learning Process In addition to the sites identified in this session, you can find more information on the topic of Best Value from the following: Federal Acquisition Regulations (FAR), 48 CFR 15.1 (2012), Source Selection Processes and Techniques, provides specific information on strategies and processes for determining the best value selection process for acquisition of goods and services. While the FAR primarily discusses acquisitions under government contracts, the information is equally relevant for procuring transportation services under contracts, tenders, or one-time only request for offer scenarios. Acquisition.gov 7 Steps to Performance-Based Services Acquisition. General Services Administration Multiple Award Schedules (MAS) Desk Reference. Section 3, Ordering Procedures, Best Value. Your own agency's policies and requirements. Page 31 of 31