There are a lot of terms, processes, and requirements to remember when it comes to GSA Schedule acquisition, but in this blog, we're going to focus on pricing, specifically determining what is "fair and reasonable." When establishing a GSA Schedule contract, the first thing to note is that the federal government intends to obtain equal or better pricing. Why do they need to do this? Well, GSA has determined the prices under the GSA Schedule to be "fair and reasonable."
During GSA Schedule 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 and how do you ensure you are proposing the right numbers? Let’s discuss the highlights so that your offer can be successful during the contract review process.
1. What is “Fair and Reasonable" Pricing?
During GSA contract negotiations, the Contracting Officer (CO) 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 CO has considered a price point for agencies to purchase these goods or services, with tax payer dollars. The specific determination depends on whether you opt into Transactional Data Reporting (TDR) or Commercial Sales Practices (CSP), which we'll discuss below.
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. But the way GSA goes about this in the contract review process can differ on whether you opt into TDR or CSP.
With CSP, or Commercial Sales Practices, you are required to identify your commercial sales, your Most Favored Customer (MFC) and Basis of Award (BOA) customer (which can often be the same as your MFC. With TDR, or Transactional Data Reporting, it's based off market research. The clause below in the General Acquisition Services Manual (GSAM Change 171 GSAR Case 2019-G503) explains how exactly GSA determines "fair and reasonable" pricing:'
Order of preference. When evaluating MAS offers and establishing negotiation objectives, Contracting Officers shall–
(1) Use the following data that is already readily available in accordance with FAR 15.404-1(b)(2)(ii):
(i) Prices paid information on contracts for the same or similar items.
(ii) Contract-level prices on other MAS contracts or other government-wide contracts for the same or similar items.
(iii) Commercial data sources that consolidate and normalize prices offered by commercial vendors to the general public to compare prices for the same or similar items.
(2) If the Contracting Officer cannot determine the prices offered to be fair and reasonable based on the data described in 538.270-2(c)(1), perform market research to compare prices for the same or similar items in accordance with FAR 15.404-1(b)(2)(vi).
(3) If the Contracting Officer cannot determine the prices offered to be fair and reasonable based on the data described in 538.270-2(c)(1) or (2), perform an analysis of data other than certified cost or pricing data (as defined at FAR 2.101) provided by the offeror in accordance with FAR 15.404-1(b)(2)(vii).
Under (1), GSA is evaluating GSA Schedules that are using CSP, looking at evidence supplied in your commercial price list, and commercial sales practices. Under (2), the CO does not necessarily have all your data since you don't have to disclose your MFC/BOA and submit a CSP document, so market research is used. This doesn't mean you don't want to conduct market research if you opt into CSP, however. The main idea here is to do the research and determine what others have done before creating your own pricelist.
3. Market Research is Key to Success
Market research 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 non 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. Your CO will also conduct market research to ensure everything matches up.
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 Request for Quote (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.
Price analysis is a subjective evaluation done by your 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.
Do You Have More Questions About "Fair and Reasonable Pricing?"
"Fair and reasonable" pricing makes GSA contracting mutually beneficial for the government and contractors., If you have any questions about "fair and reasonable" pricing or need assistance with your GSA Schedule contract, reach out to one of our consultants today. We would be happy to help you with your GSA Schedule acquisition, or maintaining your current GSA Schedule prices.
