1. Source Selection Process Value Adjusted Total Evaluated Price (VATEP)
Presented by: Carole Green
Professor of Contract Management
Defense Acquisition University - South

2. Source selection process
DoD Source Selection Procedures (31 March 2016)
Best Value Continuum
Subjective Trade-off
Lowest Priced Technically Acceptable (LPTA)
Value Adjusted Total Evaluated Price (VATEP)

3. What is source selection?
Subjective Trade-off
What is source selection?
Obtaining the best value for the Government in negotiated acquisitions, depending on the relative importance of cost or price and the level of performance risk.
Subjective Trade-off – Subjective evaluation when the requirement is less defined and the performance risk is moderate to high

4. Lowest price technically acceptable (LPTA)
Lowest Price Technically Acceptable (LPTA) – Objective evaluation when the requirement is clearly defined and the risk of unsuccessful performance is minimal

5. Value adjusted total evaluated price (vatep)
VATEP Trade-off – A structured technique that objectivizes how some of the requirements would be treated in the tradeoff process

6. What is vatep?
A tradeoff source selection process where the offeror’s total proposed price may be adjusted based on the “value” placed on better performance as identified in the solicitation.
How is the value of better performance determined?
What are the components of VATEP?
How is the VATEP process identified in the solicitation?

7. How is the value of better performance determined?
The requirements owner (e.g. program management office) determines which above threshold (minimum) capability requirements are truly of substantial benefit and how they are valued relative to each other and in absolute terms.

8. What are the vatep components?
Threshold – Minimum acceptable value of an attribute that is considered achievable with the available cost, schedule and technology at low-to-moderate risk.
Objective – The desired operational value of an attribute that is achievable but may be at a higher risk in cost, schedule, and technology.
Value – Absolute (monetary) worth of achieving more than the threshold (minimum) performance capability
Affordability Cap – The approved cost constraints for major system acquisitions or approved funding allocated for a given acquisition.

9. Vatep Example
The offeror’s total evaluated price for CLIN X001AA will be adjusted, for evaluation purposes only, in accordance with the chart below where above-threshold performance has been achieved for any of the three objectives identified.
VATEP Objectives
Performance Work Statement (PWS) Paragraph
Maximum VATEP (% Reduction in proposed CLIN price)
Calculation*
Payload
6.2.7 3%
(Offerors proposed payload less the threshold of 2,100)/600*3%
Self-Deployment
6.2.9 2%
Objective is binary. The proposal will either meet or fail to meet the objective.
Airspeed
6.2.15 1%
(Offerors proposed airspeed less the threshold of 250)/150*1%
*Payload: 2,100 is the threshold and 600 is the delta between threshold & objective
Airspeed: 250 is the threshold and 150 is the delta between threshold & objective

10. Vatep Example - Payload
Offeror A
Offeror B
Offeror C
Payload (3%)
2,250
2,180
2,200
Price
$14,000,000
$12,500,000
$13,750,000
VATEP Calculation
(2,250-2,100)/ 600)*420,000 =
(2,180-2,100)/ 600*375,000 =
(2,200-2,100)/ 600*412,500=
VATEP Adjustment
$105,000
$50,000
$68,750
*Payload: 2,100 is the threshold and 600 is the delta between threshold & objective

11. Vatep Example – Self-Deploy
Offeror A
Offeror B
Offeror C
Self-deployment (2%)
YES
Price
$14,000,000
$12,500,000
$13,750,000
VATEP Adjustment
$280,000
$250,000
$275,000

12. Vatep Example - airspeed
Offeror A
Offeror B
Offeror C
Airspeed (1%)
275
260
300
Price
$14,000,000
$12,500,000
$13,750,000
VATEP Calculation
( )/150)* 140,000 =
( )/ 150*125,000 =
( )/150* 137,500 =
VATEP Adjustment
$28,333
$8,333
$45,833
* Airspeed: 250 is the threshold and 150 is the delta between threshold & objective

13. VATEP Trade-off Example cont’d
Offeror A
Offeror B
Offeror C
Payload
$105,000
$50,000
$68,750
Self-Deployment
$280,000
$250,000
$275,000
Airspeed
$28,333
$8,333
$45,833
Proposed Price
$14,000,000
$12,500,000
$13,750,000
VATEP Adjustment
$413,333
$308,333
$389,583
VATEP
$13,586,678
$12,191,667
$13,360,417
And the winner is:
???
The Award Price is:
???

14. HOUSE BUYING EXERCISE

15. LPTA Exercise: Buying a house
Minimum Requirements:
4 bed/2 bath
No more than 1-hour commute
Schools must be at rated at least 3 for both middle and high schools (NOTE: One child is in 5th grade and one child is in 10th grade)
Option 1
Option 2
Option 3
Bed/Bath
4/3.5
4/2.5
4/3
Commute
45 Minutes
1 Hour
30 Minutes
School Rating
Middle 4/High 3
Middle 3/High 4
Middle 3/High 3
Price
$675,000
$610,000
$620,000
And the winner is:
Option 2

16. Trade-off exercise – buying a house
Factors:
Technical
Bed/Bath
Commute
School system
Price
Technical is significantly more important than price. All technical sub-factors are in descending order of importance.

17. Trade-off Exercise cont’d
Minimum Requirements:
4 bed/2 bath
No more than 1-hour commute
Schools must be rated at least 3 for both middle and high schools
Option 1
Option 2
Option 3
Bed/Bath
4/3.5
4/2.5
4/3
Commute
45 Minutes
1 Hour
30 Minutes
Schools
Middle 4/High 3
Middle 3/High 4
Middle 3/High 3
Price
$675,000
$610,000
$620,000
And the winner is:
???

18. VATEP Trade-off exercise – buying a house
If you meet the minimum requirements:
4 bed/2 bath
No more than 1-hour commute
Schools must be rated at least 3 for both middle and high schools
A VATEP adjustment will be made when:
Square footage of the house is between 2,500-3,000 SF
House has a basement
House has attic space for conversion

19. VATEP Trade-off Exercise cont’D
VATEP Objective
PWS Paragraph
Maximum VATEP adjustment
Calculation of VATEP*
Sq Footage
PWS
3% of Proposed Price
(SF proposed less the threshold (minimum) of 2,500)/500*3%
Basement
PWS
$3,000
Objective is binary. Offeror will either meet or fail to meet the objective.
Attic Space
PWS
$2,000
*Square Footage: 2,500 is the threshold and 500 is the delta between threshold & objective

20. VATEP Trade-off Exercise – Square footage
Option 1
Option 2
Option 3
Square Footage
2,900
2,700
2,500
Price
$675,000
$610,000
$620,000
VATEP Calculation
(2,900-2,500)/ 500*20,250=
(2,700-2,500)/ 500*18,300=
(2,500-2,500)/ 500*18,600=
VATEP Adjustment
$16,200
$7,320 $0
*Square Footage: 2,500 is the threshold and 500 is the delta between threshold & objective

21. VATEP Trade-off Exercise – basement
Option 1
Option 2
Option 3
Basement NO
YES
Price
$675,000
$610,000
$620,000
VATEP Adjustment
$3,000 $0 $0

22. VATEP Trade-off Exercise – attic space
Option 1
Option 2
Option 3
Attic Space NO
YES
Price
$675,000
$610,000
$620,000
VATEP Adjustment
$2,000 $0 $0

23. VATEP Trade-off Exercise cont’d
Option 1
Option 2
Option 3
Square Footage
$16,200
$7,320 $0
Basement
$3,000
Attic Space
$2,000
Proposed Price
$675,000
$610,000
$620,000
VATEP Adjustments
VATEP
$16,200
$7,320
$5,000
$658,800
$602,680
$615,000
And the winner is:
???
The Award Price is:
???
The Affordability Cap is $610,000:
Option 2

24. VATEP Solicitation Requirements
How is VATEP incorporated into the solicitation?
Performance Work Statement – Must identify the threshold and objective performance capabilities
Section M – Evaluation Factors for Award
Must state that VATEP will be used as part of the proposal evaluation
Section L – Instructions, Conditions, and Notices to Offerors
Must identify how VATEP will be used during the evaluation process.
Must advise offerors that the contract will reflect all above-minimum performance capabilities for which evaluation credit was given in the source selection

25. VATEP overview Threshold Objective
What are four things you must know before VATEP can be employed in an acquisition?
Threshold
Objective
Value of added performance capability
Affordability cap

26. QUESTIONS?