Pricing and a GSA Contract

There is much to learn about federal contracting, especially between your Schedule Solicitation document and the Federal Acquisition Regulations (FAR). But there is also a great deal to gain in the federal market.

An example is with a manufacturer who gives distributors a 50% discount, retailers a 30% discount, and the list price for general public is no discount. When negotiating with the Contracting Officer for your GSA offerred prices, this manufacturer must make the argument that the federal purchaser is most similar to a retailer or end-user. If the manufacturer commits error here, and their proposed pricing shows equal or better prices being offered to a customer other than the GSA (the distributor’s discount of 50%), then the GSA may reject the proposal, distributors will be incapable to earn a profit from Government sales, and will be cut-out of that market entirely.

Once negotiations are settled, and a GSA Contract is awarded, the “Basis of Award” will be on the MFC whose price structures best relate to the GSA offered pricing. And, if the basis of award (e.g. Commercial List Prices) are ever lowered in the future, a company is contractually obligated to reduce the GSA pricing as a ratio. So, if you lower your prices to an end-user in order to make a big sale, your GSA Contract is technically and contractually impacted by that transaction.

When one is obtaining a GSA Contract, it is likely that the pricing section carries the most important because pricing has the biggest impact on a company’s bottom line. A question which is commonly brought up is “Do I have to give the government the best price that I can offer?”

The response is both yes and no. Yes, a company must offer the government pricing that is equal or better than your Most Favored Customer (MFC), however the MFC can be selected as your current customer with purchasing patterns most comparable to those anticipated for government customers.