The General Services Administration (GSA) appears to be placing more emphasis on obtaining the lowest possible price when negotiating GSA schedule contracts.

The following is a paragraph from the Schedule 00CORP Consolidated Schedule Request for Proposal. Note the reference to the General Accounting Office.

Pricing goal: Most Favored Customer (MFC): The GSA Federal Supply Service awards over $5 billion dollars annually for goods and services under the schedules program; one of the largest single contracting activities in the nation. GSA has a fiduciary responsibility to the American taxpayers and to customer agencies to take full advantage of the Government's leverage in the market in order to obtain the best deal for the taxpayer. Accordingly, the U.S. General Accounting Office has specifically recommended that "the price analysis GSA does to establish the Government's Multiple Award Schedule (MAS) negotiation objective should start with the best discount given to any of the vendor's customers." GSA seeks to obtain the offeror's best (i.e., MFC) price based on its evaluation of discounts, terms, conditions, and concessions offered to commercial customers. Offerors inquire frequently as to a means of facilitating the processing of their contract offers. There are many factors involved, but all things being equal, an initial MFC offer requires less review and analysis and is therefore more likely to be finalized rapidly. This policy could easily be interpreted as saying: "Cave in and give the government Most Favored Customer pricing even though it is not profitable because you will get your schedule faster."

The federal acquisition regulations say the government should seek fair and reasonable pricing. However, because of this new emphasis, the price GSA seeks may not be fair and reasonable.

Excerpts from the GSA Acquisition Manual are as follows.The Government will seek to obtain the offeror's best price (the best price given to the most favored customer). However, the Government recognizes that the terms and conditions of commercial sales vary and there may be legitimate reasons why the best price is not achieved.

When establishing negotiation objectives and determining price reasonableness, compare the terms and conditions of the MAS solicitation with the terms and conditions of agreements with the offeror's commercial customers. When determining the Government's price negotiation objectives, consider the following factors:

• Aggregate volume of anticipated purchases.
  
• The purchase of a minimum quantity or a pattern of historic purchases.
  
• Prices taking into consideration any combination of discounts and concessions offered to commercial customers.
  
• Length of the contract period.
  
• Warranties, training, and/or maintenance included in the purchase price or provided at additional cost to the product prices.
  
• Ordering and delivery practices.

Any other relevant information, including differences between the MAS solicitation and commercial terms and conditions that may warrant differentials between the offer and the discounts offered to the most favored commercial customer(s). For example, an offeror may incur more expense selling to the Government than to the customer who receives the offeror's best price, or the customer (e.g., dealer, distributor, original equipment manufacturer, other reseller) who receives the best price may perform certain value-added functions for the offeror that the Government does not perform. In such cases, some reduction in the discount given to the Government may be appropriate. If the best price is not offered to the Government, you should ask the offeror to identify and explain the reason for any differences. Do not require offerors to provide detailed cost breakdowns.

You may award a contract containing pricing which is less favorable than the best price the offeror extends to any commercial customer for similar purchases if you make a determination that both of the following conditions exist:

• The prices offered to the Government are fair and reasonable, even though comparable discounts were not negotiated.
  
• Award is otherwise in the best interest of the Government.
  
• The regulations clearly state that GSA should consider value and contract terms and conditions when determining fairness and reasonableness.

In summary, a GSA schedule price offer and subsequent telephone negotiations are just like any business negotiation, e.g., buying a car. It's a give and take process and the companies making the most convincing arguments supporting their price (on paper and during telephone discussions) will obtain the best pricing.

How do you negotiate a price point which is reasonable to GSA and profitable for your company?

Fedmarket.com offers a one-day class on GSA Schedules covering the fundamentals of GSA Schedules including all aspects of GSA pricing.

Visit http://new.fedmarket.com/seminars/gsa-schedules.shtml to learn more about this class.