What Is the Definition of a Fair and Reasonable Price

When creating a gsa annex contract, it is important to note that the federal government intends to obtain prices equal to or better than the supplier`s most favored customer (MFC). The reason for this is that the GSA set the prices as “fair and reasonable” under the GSA Schedule. If the proposed prices are not deemed “fair and reasonable” during GSA`s contract negotiations, the offer may be rejected or further negotiated to meet GSA standards. So who determines “fair and reasonable” prices? Let`s discuss the highlights so that your bid can be successful during the contract review process. (v) Comparison of proposed prices with independent estimates of general government costs. 2. All offers with individual headings or separate subheadings shall be analysed in order to determine whether prices are unbalanced. If cost or price analysis techniques indicate that a quote is unbalanced, the main cost analysis is promoted when certified cost or price data is required. It is also useful to assess price adequacy in quotes when other information needs to be submitted in addition to certified cost or price data.

However, the determination of the cost analysis remains a subjective call for evaluation. To know if the cost elements and fees are fair and reasonable, you need to ask yourself three questions: 2. Price analysis: Price analysis is the predominant method used to determine the price as fair and reasonable for commercial items. It is essentially the comparison of value. The comparison depends on the resources and data available to the customer. This is usually a kind of comparison with other prices. Additional data may be taken by the seller`s contractual partner to determine whether the price is reasonable or not. There are several techniques for price analysis. Three of the most preferred are: 3.

Market Research: This method is essential because it is important to understand the market in order to determine the appropriate price. (A) The previous price must be a valid basis for comparison. If there has been a significant period of time between the last purchase and this acquisition, if the terms of the acquisition differ significantly, or if the reasonableness of the previous price is uncertain, the previous price may not be a valid basis for comparison. (iv) Comparison with competitors` published price lists, prices published on the commodity market, similar indices and discounting or discounting agreements. 4. Cost analysis may also be used to evaluate data other than certified cost or price data to determine cost relevance or cost realism where a reasonable and reasonable price for commercial or non-commercial items cannot be determined solely by price analysis. Federal government procurement teams rely on the unmatched flexibility of PROPRICER Government Edition (GE) for efficient and accurate cost and price analysis. 2. With the exception of the acquisition of commercial goods, procuring entities shall require suppliers to indicate in their tenders those delivery items which they do not manufacture or to which they will not contribute substantial value, unless reasonable price competition is expected [10 U.S.C.2306a(b)(1)(A)(i) and 41 U.S.C.3503(a)(1)(A)].

This information is used to determine whether the intrinsic value of an item has been distorted by the application of overhead and whether these elements should be considered for the outbreak. The contracting entity should, where appropriate, require such information in all other negotiated contracts. (2) The Government may use various pricing analysis techniques and procedures to ensure a fair and reasonable price. Examples of such techniques include: B) The previous price must be adjusted to take account of significantly different economic and market conditions, quantities and factors. In the case of similar items, the customer must also adjust the anticipated price to take into account significant differences between the similar item and the item to be purchased. (i) comparison of the proposed prices received in response to the call. Normally, reasonable price competition results in a fair and reasonable price (see 15.403-1(c)(1)). 1. The contracting entity should require staff with specific knowledge, skills, experience or competences in the fields of technology, science or management to carry out a technical analysis of the proposed types and quantities of materials, labour, processes, special tools, equipment or immovable property, the adequacy of the waste and deterioration and other related factors set out in the proposal(s); determine the need for and relevance of the proposed resources. assuming reasonable cost-effectiveness and efficiency. (2) The technical analysis should at least examine the nature and quantity of the proposed material as well as the need for the type and quantity of working hours and the combination of work. Any other data that may be relevant for an assessment of the supplier`s ability to meet the technical requirements or for the analysis of the costs or prices of the service or product offered should also be included in the analysis.

Techniques for determining the fair and reasonable price: (ii) Assess the impact of supplier`s current practices on future costs. During this assessment, the client must ensure that the effects of inefficient or unprofitable practices in the past are not projected into the future. When pricing the production of recently developed complex equipment, the entrepreneur must perform an analysis of trends in labor and basic materials, even in times of relative price stability. (3) To assess the reasonableness of each cost component, cost analysis shall be used if certified cost or price data are required. Price analysis should be used to verify that the total price offered is fair and reasonable. Realistic cost analyses can be applied to cost reimbursement proposals or competitive fixed-price contracts to determine the likely cost of performance. In these circumstances, an analysis is necessary to determine whether the price offered is too low and could jeopardise the successful performance of the tasks described in the tender specifications. Fair and reasonable prices have a dramatic impact on the government`s results.

Its interpretation determines how billions of dollars are spent, how stock prices are valued, jobs are created, services and goods are delivered, and how disputes are resolved. According to the Federal Acquisitions Regulations, “costs are considered reasonable in amount and nature if they do not exceed the costs that would be incurred in the course of the business.” The objective of the supply analysis is to ensure that the agreed final price is fair and reasonable. 4. Value analysis may provide information on the relative value of a product and public authorities may apply it in conjunction with the price analysis techniques set out in point (b)(2) of this Section. Many factors go into price analysis, so be prepared to give information to your subcontractor. (1) Unbalanced pricing may increase performance risk and result in the payment of unreasonably high prices. Price imbalance occurs when, despite an acceptable total price, the price of one or more items is significantly overvalued or undervalued, as indicated by the use of cost or price analysis techniques. The greatest risks associated with unbalanced pricing occur when- (1) The customer is responsible for assessing the reasonableness of the prices offered.

The analytical techniques and procedures described in this subsection may be used individually or in combination with others to ensure that the final price is fair and reasonable. .