This series of FAR summaries is meant to take a meaningful portion of the Federal Acquisition Regulations to ensure an easy-to-understand approach to maintain that readers comprehend the process of doing business with the government and that the government exercises a fair and reasonable approach to doing business with the general public.
FAR 12.209 Determination Of Price Reasonableness
Your Contracting Officer makes such a decision by comparing quotes and submitted offers but if only one proposal is submitted then they use market research, historical trends within the federal government, current commercial visibility such as catalogs or brochures, personal knowledge, comparison to the project’s independent government estimate or any other reasonable basis to make a determination of fair and reasonable pricing.
When the proposal does not include certified cost or pricing data (price elements or build-up) then prices are compared. If it does then both prices and pricing elements are compared. Your CO also may use secondary data (as listed in the previous paragraph) to analyze price reasonableness. They also have pricing experts with very powerful software they can call upon. They also are allowed to use ratios of comparison such as dollar per horsepower or price per capsule to draw a conclusion. Market indexes such as those calculated by the Department Of Labor are also considered if price comparisons are being made.
If elements of cost are involved the CO may decipher what is necessary and allowable, project cost trends compared to current and historical trends, prepare self estimates, negotiate any or all elements and they are trained to eliminate past errors and mishaps. This is easy because the government documents everything. Your CO won’t make the same mistake twice.
The going story is that the government is out to get you but how are they when they set the table for you to eat? The market dictates the prices. Prices are generally lower on a contract than a commercial buy. Businesses are being advertised to, negotiated with and dealing to the biggest buyer in the world and it’s a big market. It’s natural for the government to expect your best price and yes they call that fair and reasonable. Do you want to know why? They are using taxpayer dollars to make their purchases which serve and protect you and me.
Pricing services proposals and drafting the market research documentation was by far the funnest administrative task I had in the government with negotiations of either commodities or services being the most fun, of course. I only dealt with price analysis but my write-ups included aspects of cost analysis because our services contracts displayed pricing elements for each line item to show how the fully-loaded price was calculated.
If you think I can help you then email nicholas.s.robertson@outlook.com for your introductory email and free consultation.
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