A fair and reasonable price is the price point for a good or service that is fair to both parties involved in the transaction. This amount is based upon the agreed-upon conditions, promised quality and timeliness of contract performance. In government contracting, a fair and reasonable price is subject to both statutory and regulatory limitations.
What does'fair and reasonable pricing'mean?
This time, let's delve a bit more deeply into the meaning of one of the more arcane phrases used in the procurement process: "fair and reasonable pricing." The Federal Acquisition Regulation (FAR) requires contracting officers, prior to signing most contracts, to establish whether or not the price is "fair and reasonable."
What does fair and reasonable mean in real estate?
A determination that a price is fair and reasonable is really a conclusion that the proposed price is fair to both parties, considering the quality, delivery and other factors. The basis for reaching the conclusion is found in the facts and information considered and analyzed by the buyer.
What is fair and reasonable price affirmation?
The Federal Acquisition Regulation (FAR) requires contracting officers, prior to signing most contracts, to establish whether or not the price is "fair and reasonable." Under some circumstances, a simple affirmation by a contracting officer is all that's necessary.
How do you determine if a price is reasonable?
A determination that a price is fair and reasonable is really a conclusion that the proposed price is fair to both parties, considering the quality, delivery and other factors. The basis for reaching the conclusion is found in the facts and information considered and analyzed by the buyer. This is what is called price analysis.
What does fair and reasonable price mean?
A fair and reasonable price is the price point for a good or service that is fair to both parties involved in the transaction. This amount is based upon the agreed-upon conditions, promised quality and timeliness of contract performance.
What is considered a reasonable price?
Reasonable price means a decision reached jointly between a buyer and seller of property, reflecting a judgment influenced by the economic realities of the marketplace and the relative bargaining powers of the parties and is a price that provides the best total value in consideration of availability, delivery time, ...
What are some ways of determining a fair and reasonable price?
Where an item has an established market price, verification of an equal or lower price also establishes the price to be fair and reasonable. Example: the purchase of metals such as lead, gold, silver, or commodities such as grains.
What's fair price?
Fair price is a selling price that considers quality, performance, supply conditions, time of delivery and payment options. It is calculated at the level that is fair for both sides. The seller gains some margin, which is not excessively too high. Therefore, both sides of the transaction should be glad with that price.
What are some of the major factors to consider in determining a fair and reasonable price when undertaking a project with the government?
The following are the main determining principles:Adequate Price Competition.Price Analysis.Cost Analysis.Market Research/Historical Market Pricing.Cost Realism Analysis.
How do we handle an offer that we Cannot initially determine to be fair and reasonable?
If the contracting officer cannot determine whether an offered price is fair and reasonable, even after obtaining additional data from sources other than the offeror, then the contracting officer shall require the offeror to submit data other than certified cost or pricing data to support further analysis (see 15.404-1 ...
How do you determine the price of a product?
How to calculate selling price of a product formulaCost price = Raw Materials + Direct Labor + Allocated Manufacturing Overhead.Selling price = Cost price x 1.25 SP = 50 x 1.25.Gross Profit = Total Revenue – Cost of Goods Sold Gross Profit Margin = Gross Profit / Revenue.
Who has the ultimate fiduciary responsibility to obtain fair and reasonable pricing?
Buyers have a fiduciary responsibility to California's citizens and taxpayers to protect the state's interest as a whole, to place the state's interest above their own interests, to safeguard the state's resources.
Why is fair pricing important?
Also, a fair price boosts buying intentions and may increase customers' loyalty, thus sustaining the business in the future. By offering fair prices, a commercial firm may contribute to a sustainable development, offering to its customers a good value and being social responsible.
Why is it important to have fair pricing?
Fair prices setting is one of the principles sustainable marketing is based on, reflecting a long term orientation for a company. By following this decisional direction, the commercial firm increases the value offered to its customers and it becomes more socially responsible.
What is meant by competitive pricing?
Competitive pricing is the process of strategically selecting price points for your goods or services based on competitor pricing in your market or niche, rather than basing prices solely on business costs or target profit margins.
Whats is inflation?
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
What is the least preferred method of determining price reasonableness?
FASA made submission of cost or pricing data the least preferred method of determining price reasonableness. FAR 15.404-1 (b) (2) lists seven price analysis techniques by which the Government can make a fair and reasonable price determination.
Why is fair and reasonable price determination important?
Fair and reasonable price determinations are used for evaluating quotations, bids, and proposals for the source selection decision. They are also used during sole-source negotiations. The policy of the U.S. Government is to contract for supplies and services at fair and reasonable prices. While buyers in the private sector are also interested in paying fair and reasonable prices, it is particularly important in Government procurement because of the scrutiny that Congress and the general public places on Government procurement. The Government is also interested in fair and reasonable price determinations to promote a healthy and efficient competitive sourcing environment. The Federal Acquisition Streamlining Act (FASA) of 1994 established a preference for the types of information used to assess price reasonableness.
What is adequate price competition?
Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes price reasonableness. This is the most commonly used technique, as the majority of Government procurement actions attract two or more offers that are competing independently for award.
Why is the government interested in fair and reasonable price determinations?
The Government is also interested in fair and reasonable price determinations to promote a healthy and efficient competitive sourcing environment. The Federal Acquisition Streamlining Act (FASA) of 1994 established a preference for the types of information used to assess price reasonableness.
Why is it important to pay fair and reasonable prices?
While buyers in the private sector are also interested in paying fair and reasonable prices, it is particularly important in Government procurement because of the scrutiny that Congress and the general public places on Government procurement.
What is catch all analysis?
Analysis of pricing information provided by the offeror. This “catch-all” category includes information that does not fall into the other categories.
Can contractor cost estimates be used in lieu of government cost estimates?
A contractor-developed cost estimate may not be used in lieu of a Government cost estimate. Comparison of proposed prices with prices obtained through market research for the same or similar items. Trade journals, newspapers, and economic indexes can provide useful comparative information.
What is fair and reasonable price determination?
A fair and reasonable price determination is an assessment by the US Government that an offeror’s proposed price for a supply or service can be considered “fair and reasonable” on the basis of applying one or more price analysis techniques.
Why is the government interested in fair and reasonable price determinations?
The Government is also interested in fair and reasonable price determinations to promote a healthy and efficient competitive sourcing environment. The Federal Acquisition Streamlining Act (FASA) of 1994 established a preference for the types of information used to assess price reasonableness.
What is fair and reasonable price?
Fair and reasonable price means a price that is commensurate with the extent and complexity of the services to be provided and is comparable to the price paid by the department or other entities for projects of similar scope and complexity. Fair and reasonable price means the price set out in the Authority to Proceed / Access Property.
What is present fair salable value?
Present Fair Salable Value The amount that could be obtained by an independent willing seller from an independent willing buyer if the assets of the Borrower and its Subsidiaries taken as a whole are sold with reasonable promptness in an arm’s-length transaction under present conditions for the sale of comparable business enterprises insofar as such conditions can be reasonably evaluated.
What is a reasonable pupil?
Reasonable pupil means a pupil, including, but not limited to, an exceptional needs pupil, who exercises average care, skill, and judgment in conduct for a person of his or her age, or for a person of his or her age with his or her exceptional needs.
What does "reasonable payment" mean?
Reasonable payment means, with respect to professional and other technical services, a payment in an amount that is consistent with the amount normally paid for such services in the private sector.
What is the best value of a contract?
Best Value means the method by which a proposal/contract, if any, is awarded, in accordance with applicable laws, rules, and regulations. Best Value includes multiple parameters, including experience, references, quality of the Vendor's product (s)/service (s), and price, as detailed in Section 6.0 Evaluation and Award.
What does "safe price" mean?
SAFE Price means the price per share equal to the Valuation Cap divided by the Company Capitalization.
What is the sale price of stock?
Sale Price means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of Stock pursuant to a Sale Event.
When does adequate price competition exist?
Adequate price competition exists when at least two companies compete independently. Should only one company respond to a solicitation, competition is considered to exist in civilian procurements if the contracting officer believes that the single company's quote or proposal was based on the expectation of competition.
What is a price analysis in the Department of Defense?
A price analysis is pretty much what it sounds like: a comparison of the offered price to historical prices paid for the same or similar items.
What does it mean when a contractor knows in advance it could get cheaper supplies than for the cost amount it certified?
If a contractor knows in advance it could get cheaper supplies than for the cost amount it certified, that's defective pricing. If a contractor manages, post-award, to lower costs thanks to a better deal with suppliers, that's business. The regulations clearly state that certification "does not constitute a representation as to the accuracy ...
What is the FAR contracting officer?
The Federal Acquisition Regulation (FAR) requires contracting officers, prior to signing most contracts, to establish whether or not the price is "fair and reasonable.". Under some circumstances, a simple affirmation by a contracting officer is all that's necessary.
What happens if a contractor finds post award errors?
If a government auditor finds post-award errors in the data, no matter how unintentional they may be, the finding almost certainly will lead to price reductions, interest payments and possible fines.
How long does the government have to audit cost or pricing?
The government has a right to audit cost-or-pricing data for three years after the date of final payment. There's a lot of confusion about what constitutes defective pricing; it doesn't occur just because actual costs turn out to be less than the certified amounts.
What counts as a cost?
What counts as a cost, according to the government, undergoes two tests -- first, it must be "reasonable," and, second, it must be "allowable." The rules controlling both concepts appear in FAR Part 31, which is dedicated to cost principles and procedures. These government cost principles are mostly foreign to the private sector and pursuing an opportunity that requires certified cost-or-pricing data could require investing in expensive, specialized government accounting software and services.
When is it necessary to pay fair and reasonable prices?
Equally important is that performing and documenting that prices to be paid are fair and reasonable is a requirement when expending or using award funds for the purchase of required goods and services that will equal or exceed $5,000.
What is the definition of fair and reasonable?
Where an item has an established market price, verification of an equal or lower price also establishes the price to be fair and reasonable. Example: the purchase of metals such as lead, gold, silver, or commodities such as grains.
What is the basis for determining a price is fair and reasonable?
A determination that a price is fair and reasonable is really a conclusion that the proposed price is fair to both parties, considering the quality, delivery and other factors. The basis for reaching the conclusion is found in the facts and information considered and analyzed by the buyer.
Why is the actual price lower than the GSA?
The actual price may be lower than the GSA due to discounts , (if this is the case, it should be noted in the written analysis), or higher based upon volume sales discounts (supplier should provide their price break structure for volume sales).
What is historical pricing summary?
The historical pricing summary must be supported by appropriate documentation (computer reports or copies of PO’s).
Why do we need price analysis?
This, as noted above, insures that funds are expended in the most cost effective manner and conserves limited resources. A price that is excessive or unreasonable fails completely to accomplish this important goal; a price which is determined to be fair and reasonable is the fulfillment of this important objective.
What is cost analysis?
WHAT IS A COST ANALYSIS: A cost analysis is different from a price analysis. The major difference is that a price analysis looks at the whole price. It does not involve an examination of the individual cost elements or components that collectively comprise the seller's total price.
What factors are considered reasonableness?
Factors to be considered in determining reasonableness include: the independent government estimate, the procurement history for the solicited supplies or services, the current market climate (market prices), current price lists or advertisement, and/or a “courtesy bid” of an otherwise ineligible large business. FAR 13.106-3.
What is the determination of whether to set aside a particular procurement?
The determination of whether to set-aside a particular procurement involves a business decision within the broad discretion of the contracting officer.
Why are small business contracts set aside?
Because of the Congressional policy favoring small business, contracts may be awarded under small business set-aside procedures to small business firms at “premium prices” so long as those premiums are not unreasonable —but the determination of whether a “price premium” is unreasonable depends on the circumstances of each case.
Is a small business bid unreasonable?
In this regard, we have noted that a small business bidder’s price is not unreasonable merely because it is greater than the price of an ineligible large bidder, since there is a range over and above the price submitted by the large business that may be considered reasonable in a set-aside situation. The determination of whether a particular small business price premium is unreasonable depends upon the circumstances of each case. See, e.g., Advanced Constr., Inc., B-218554, May 22, 1985, 85-1 CPD ¶ 587 at 2 (contracting officer in a set-aside procurement properly found reasonable a small business bid which was more than 11 percent higher than large business courtesy bid); Browning-Ferris Indus., B-209234, Mar. 29, 1983, 83-1 CPD ¶ 323 at 2-3 (small business bid which was 51 percent higher than large business bid was properly found reasonable); CDI Marine Co., B-188905, Nov. 15, 1977, 77-2 CPD ¶ 367 at 2-3 (small business offer which was 17 percent higher than that of other qualified firms, large and small business alike, was properly found reasonable).
