Most Favored Customer Clause

GSA has a clause called the Most Favored Customer (MFC) clause. It requires the contractor to offer the government at least the best price it offered to a previous customer. GSA uses this clause for its schedules. There is no reason your agency can’t adopt this clause for its own contracts; one agency doesn’t have a monopoly on clauses. That being said, you may get fewer contractors than you wanted by including it in your solicitation. Still, it may be worth it in a sealed bid or lowest price technically acceptable (LPTA) situation.

Of course, not everyone is happy about MFC clauses, and I can understand why. Give it some though. Do you know people who have used this clause in non-GSA contracts?

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Jaime Gracia

The Most-Favored-Customer Clause (MFC) guarantees the government the best price a company gives to anyone, which prevents a company from treating the government different than its commercial customers during negotiations. There is noting to say that the company can not offer lower prices to the government, but that is really the critical point.

It is all what the government negotiates. Don’t ask, don’t get basically. Nonetheless, the fixation on low-price without regard to value will dominate government contracts for some time, creating a de facto “negotiations” medium to give significant discounts to the government if you hope to win federal contracts.

Certainly the MFC clause can be considered, but does not seem necessary. Aggressive negotiations are more effective.

Peter Sperry

Back in my tech marketing days, I was surprized by the number of vendors who simply would not bid on contracts containing that clause. The government has all sorts of add on requirments (green, diversity, transparency etc) that run up the cost of doing business. MFC clauses essentially prohibit vendors from reflecting those additional costs in their bids. Vendors who are so dependent on government business they have no other choice, will comply and provide the MFC price. Those who have alternatives will take advantage of them. Cosequently, the government will get the MFC price from vendors whose product or service is so substandard they cannot build a nongovernment customer base large enough to avoid it.

Mindy Giberstone

I have found that in practice, each IT contract is different enough (terms, scope, period of performance, etc.) so that it is very hard to enforce MFC clauses.

Peter G. Tuttle

Vendors usually provide the deepest discounts to customers who purchase the most volume – e.g. the most favored customers. If the government does not purchase in volume, they should not expect to get the best price. This being said, adding the clause may not be necessary if the government buyer uses marketplace competition as a tool to reduce prices. When competition is used, vendors get pretty aggressive to win the business. I absolutely agree with Jaime’s comment below about aggressive negotiations….I would add that a buyer’s knowledge of the market is also key to being able to understand what they are buying and how to get the best deal possible. Cheers.

Ron Falcone

Outside of FAR Part 8 FSS acquisitions, an MFC clause seems meaningless especially when services are involved. Many times its apples and oranges, unless your dealing with commodities or commoditized services, all acquisitions are not equal. The deal or discount is specific to the unique circumstances — volume, delivery/performance schedule, etc…