Back to Basics: Fair and Reasonable Pricing

Posted by Haley Lawrie on Aug 3, 2017 10:57:13 AM

How the GSA determines fair and reasonable pricing. 

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When establishing a GSA schedule contract, it is important to note that the Federal Government intends to obtain equal or better pricing than the offeror’s Most Favored Customer (MFC). The reason being, is that the GSA has determined the prices under the GSA schedule to be fair and reasonable. During GSA contract negotiations, if the proposed prices are not deemed “Fair and Reasonable” the offer can be either denied or negotiated further to meet the standards of the GSA. So, who determines fair and reasonable pricing? Let’s discuss the highlights so that your offer can be successful during the contract review process.

1. “Fair and Reasonable.” This is the price point for a good or service that is fair to both parties involved in the transaction. This amount is based upon the agreed-upon (via contract negotiations) conditions, promised quality and timeliness of contract performance.

 During GSA contract negotiations, the contracting officer performs a review of the proposed pricing and decides if the items are fair and reasonable,” based on already awarded “like and similar”—similar in scope and price--goods or services. The contracting officer has considered a price point for agencies to purchase these goods or services, with tax payer dollars.

2. How is “Fair and Reasonable” factored? The following are the main determining principles:

  • The pricing for “like and similar” goods or services on competitor contracts
  • Historical market pricing
  • Currently available pricing in other contract vehicles

What’s most important is how previously awarded contracts have “like and similar” goods and services priced. Do research and determine what others have done before creating your own price list.

3. Market research is key to success. It can provide the basis for reasonable prices. However, just because competitors have been awarded contracts at certain price points, doesn’t mean that your proposed GSA prices are not negotiable. Most commercial price/ terms can be negotiated, so there is no need to feel like you are stuck in the same price point as your competitors. Make sure to do research for your market, region, and on other factors like inflation rates to determine what the right price is for your company to sell its goods or services.

4. Analyze the prices. Examine and evaluate a proposed price to determine if it is fair and reasonable, without evaluating its separate cost elements and proposed profit. Price analysis compares the prices quoted and 1) Prices received in other quotes in response to the same RFQ, 2) Commercial prices such as published price lists or rebates, 3) Previously quoted prices and prices on contract for the same or very similar end items, 4) Parametric estimates, 5) Independent Government Estimates, 6) Market research for the “like or similar” goods or services.

Many factors go into the price analysis, so be prepared to give information to your contracting officer.

5. The offeror’s contracting officer is in charge of determining “Fair and Reasonable.” It requires a great deal of judgment of the data or resources obtained by the contracting officer/ contract specialist to determine the correct pricing.

 

An Important note: Price analysis is a subjective evaluation done by contracting officer — different contracting officers might make different decisions about price reasonableness. Most of the time fair and reasonable pricing is determined by market research that the contracting officer performs prior to the negotiation call. This market research is through goods or services that are “like and similar” to that of the proposed goods or services.

Fair and Reasonable Pricing makes GSA contracting mutually beneficial for the government, contractors, and the American taxpayers!

Have any suggestions on how you conduct your market research? Let us know in the comments below or tweet us at @Winvale!

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Haley Lawrie is a consultant in Winvale’s Government Contract Services Department. She is originally from Lynchburg, VA and graduated from James Madison University with a degree in International Affairs and Spanish.

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