If you are a new or prospective GSA Multiple Award Schedule (MAS) contractor, you may be wondering how to calculate your GSA prices. It’s important to consider the various factors that are involved so that your business can be profitable, but your prices are also fair and reasonable in the eyes of GSA. Having a well-defined understanding of the pricing prerequisites before entering negotiations with your Contracting Officer can be extremely beneficial for your company.
Fair and reasonable pricing, market research, Price Reduction Clause, Economic Price Adjustment, Transactional Data Reporting, and Commercial Sales Practices, are all terms associated with determining your GSA prices. In this blog, I will give a basic overview of some of the most important factors of GSA pricing and explain how you can establish and maintain your GSA prices.
What is GSA Pricing?
Pricing is a crucial aspect of a GSA Schedule, so much so that there is a dedicated pricing section in your proposal. It demands a focused and well-thought-out strategy. The prices you propose to GSA are typically better than or equal to the best prices you offer for your products and/or services commercially. In order to be a competitive contractor, it’s imperative that you carefully evaluate numerous factors when establishing your GSA prices.
Establishing GSA Pricing
One of the primary advantages for eligible entities in the MAS program is the fact that prices for goods and services are already pre-negotiated. During GSA contract negotiations, the Contracting Officer reviews the proposed pricing to determine if your prices are "fair and reasonable" based on the products and services previously awarded. Fair and reasonable pricing is determined by comparing competitors’ prices previously awarded and the proposed prices. Past invoices, catalogs, and market research are all used to validate your pricing. The following steps are recommended in the process of establishing your GSA prices.
1. Market Research
As a prospective contractor, it’s a good idea to get ahead of the curve and do some market research before negotiations. Conducting market research can help you determine your GSA prices by identifying the price points of similar items sold by other contractors. Market research is used to determine the optimal value of a product or service and collect information on market trends. One common way to conduct this research is by using GSA Advantage for products and the CALC tool for services. Once you know where your company’s prices stand in the market, you will have a better idea about what discounts to offer and what items you can expect to negotiate with your Contracting Officer.
2. Determine Eligibility for Transaction Data Report (TDR)
When formulating your GSA prices, you should know about Transactional Data Reporting (TDR) and whether you meet the requirements to opt in. Through the TDR program, GSA Schedule holders provide market information to GSA and its partner agencies, by reporting transaction-level data on products and/or services sold using GSA MAS Program monthly. TDR is only applicable to contractors with specific SINs, so check to see if the SIN you are proposing qualifies you to opt in.
If yes, this means that you are not required to disclose your Commercial Sales Practices (CSP). CSPs are used to determine the customer or class of customers that receive your greatest discounts/prices, also known as the Most Favorite Customer (MFC). Not disclosing this information creates an advantage when calculating your GSA price because the discounts you offer to GSA do not have to be based on the discounts you provide to your commercial customers.
3. Disclose your Commercial Sales Practices
If you are not eligible to opt into the TDR program, disclosing your Commercial Sales Practices (CSP) is required. While preparing your offer you should include your CSP which is basically a list of the customer classes you have sold to within the past 12 months and the discounts you offer them.
This information will help you to determine your MFC and your “Basis of Award customer” (BOA). Your MFC and BOA are often the same customer or customer class, but there are some cases where they differ. The BOA customer is the customer that is used as the representative benchmark for calculating your GSA prices. Establishing a discount relationship with your BOA customers is in accordance with the Price Reduction Clause.
The Price Reduction Clause ensures a fixed relationship between the discounts you offer to GSA, and the discounts offered to your (BOA). Through the Price Reduction Clause, any alteration made to lower the prices offered to your BOA customer will subsequently result in mandatory adjustments to your GSA prices (seen below).
How Do You Increase Your GSA Prices?
Since you can have your GSA Schedule for up to 20 years, your prices are bound to change. As part of your GSA pricing proposal, you have the option of choosing one of the two Economic Price Adjustment (EPA) clauses as your method for future price modifications.
Option 1: EPA clause 552.216-70 – This clause allows you to adjust your prices based on changes in your commercial price list. Typically, this clause pertains to companies offering products rather than services.
Option 2: EPA Clause I-FSS-969 - This EPA clause has two sub-clauses: (b)(1) and (b)(2).
- Under I-FSS-969 (b)(1) price increases are based on a fixed escalation rate that is negotiated prior to the contract award. Price increases are awarded automatically on the 12-month anniversary of your GSA Schedule contract effective date.
- Under I-FSS-969 (b)(2) price increases are based on an agreed-upon market indicator. This market indicator could be a public index, public survey, or another public-based indicator, but it is typically connected to the Bureau of Labor Statistics Employment Cost Index.
Understanding GSA Pricing
GSA pricing is an essential component of your GSA Schedule proposal. Understanding each of the important price factors listed above can help you to create competitive GSA pricing. However, at Winvale we understand that comprehending GSA pricing can be daunting. That is why our team of consultants are always happy to answer any questions and set you on the right path.
