GSA Schedule Price Reduction Clause

The GSA Schedule Price Reduction Clause (PRC) makes almost everyone scratch their head. A simplified example may help to clear up some of the confusion. A company sells a single product with a list price of $100. The company discounts according to the market and the lowest price that the product has been sold is $90. ABC has contractually committed to purchase 1,000 products @ $90. The next lowest price paid for the product is $94 for quantity 10. The company's GSA schedule offer would show:
  1. Commercial Price: $100
  2. Most Favored Customer: ABC Company (invoices show a price of $90; lowest price charged to anyone)
  3. Basis of Award Customer (The customer group used as the basis for GSA discounts): All Commercial Customers
  4. Discounts Offered to GSA in proposal:
    • 10% for orders of 1,000 or more products
    • 6% for orders under 1,000
  5. Discounts in GSA Schedule contract (after negotiations):
    • 10.8% for orders of 1,000 or more products
    • 6.4% for orders under 1,000
In this case, the PRC in the contract says that the company must adjust its prices to GSA proportionately if it offers commercial customer discounts of more than 10% for orders of 1,000 or more products or 6% for orders under 1,000. The company in this example offered GSA most favorable customer pricing and after negotiation ended up with GSA receiving slightly better than most favorable customer pricing. The example is clear-cut because most favorable customer pricing was tied to a contractual commitment of 1,000 items. Normally most favorable customer pricing is not this clear-cut and negotiations with GSA become more of a haggle.
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