Most Favored Customer- How It Establishes Your Contract Pricing

A Most Favored Customer also known as MFC is a category of customers that you offer your best discount pricing. When submitting a proposal for GSA Schedule the agency request that you outline what you offer your MFC. Based on the priced category offered to the MFC the Government wants to be offered similar or better pricing. You need to determine which category of customers is your MFC and negotiate a fair and reasonable price that will be offered to the agency. You should also remember to have a government contract does not mean your business will grow so ensure the pricing negotiated will be profitable not only to the agency, but to your business as well.

A clause will be incorporated into the contract aptly called the MFC Clause. This clause guarantees the price negotiated and ensures fair and reasonable pricing. Your contract will also incorporate a Price Reductions Clause (PRC) in accordance to GSAM 552.238-75. The PRC stipulates if you offer better pricing than what was negotiated within your contract to another customer you are in violation. You should adhere to the prices negotiated and notify the agency of any pricing modifications that are made. If you offer a better discount to another customer and not notify the agency you are in violation of the terms and conditions of the contract. Dependent upon the severity of the violation there are consequences, here are a few examples:

  • Backpay to the Government from the date the violation took place.
  • Company Audit
  • Criminal penalties
  • Civil penalties

Do you have any additional input on MFC, I would love to hear it.

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Profile Photo Michael Del-Colle

A bit of a different view: there is a general presumption that when a firm chooses to pursue a GSA MAS contract it must offer a price consistent with its most favored customer. I would suggest an offeror needs to submit a price that it can support and that should be the basis of award [BOA]. BOA pricing might be the MFC but need not be the MFC if the Government’s plans for acquiring an item or service are different than and make less financial sense than the arrangements in place with the MFC. For example, my MFC might order in minimum quanties of 100, with drop shipments to regional distribution sites and with no additional changes or modifications to my regular business processes. The Government, on the other hand, wants a unit price of 1, shipped anywhere in the US and wants some additional labeling and some minimal changes to the product [ insufficient to otherwise make this a non-commercial item]. The basis of award pricing offered the Government should match [as closely as possible] what you will charge the client most closely matching the Government circumstances of purchase not your most favord customer. The two are not equals, regardless of how huffy & puffy the Government gets. The Government may discuss and negotiate the price offered; but a wise contractor will not offer the Government a price unrelated to the actual experience

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Jay

Can a MFC/BOA customer be changed during a current contract? My company received a GSA contract based on our MFC price, however, we did not realize that it was possible to have a BOA customer that is different than the MFC.

Our MFC customer in question adds value such: marketing our products to customers, ordering in bulk, ordering direct without us having to pay commission to sales people, etc.

We we would like to hire an employee to grow our market share to GSA customers, but we cannot afford to with our current price discount to the GSA.

Is there a way that I can change my BOA customer due to these revelations while still in my GSA contract period?

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