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tim

Discouting GSA Rates

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I'm seeking some input with regards to discounting GSA rates to as there doesn't appear to be clear guidance on this. The specific issue involves using a GSA schedule as a basis for pricing with clients outside of the "most-favored customer" category.

Example:

Let's assume Company X has a GSA schedule and a list of labor categories. The most favored customer/basis of award is "for-profit entities".

Company X is submitting a bid to a non-profit client (i.e. outside of the most favored customer) in a T&M format. Rather than developing a fully loaded rate for the client, Company X simply uses a comparable labor category/rate off of their GSA schedule and reduces it by 5% (or any other percentage - but a lower rate nonetheless). This is done because:

(a) it's quicker and easier to do (why go through the trouble of building a loaded rate when one has been built before); and

(B) if the client starts asking for fair and reasonable pricing, Company X can simply indicate that they are providing a lower rate then a GSA schedule rate which has already been deemed to be fair and reasonable.

The issue is whether or not this would raise issues with GSA seeing that the client involved here does not fall within the "most favored customer" category (and thus the Price Reduction Clause not being affected).

I welcome any thoughts or experiences anyone has.

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GSA is also non-profit.

GSA rates have already been determined F&R. Offering a discount off GSA rates to another non-profit would not be necessary to get to F&R pricing, and while it may not be a violation of GSA contract terms, would likely make life more difficult in the next price negotiation with GSA.

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Carl,

That link has nothing to do with tim's question. The issue is how does tim offering a lower price to a non-government customer affect his GSA contract?

tim,

Ask your GSA contracting officer. If you provide a lower price to a customer than your disclosed in your GSA contract negotiations, you could be penalized. Your GSA prices are established by comparing your offer to your "most favored customer." Now you are proposing to offer someone an even lower rate. Naturally GSA would be concerned.

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Guest carl r culham

former - I think the reference does. tim has indicated that the discount offered is simply a reduction off of their already established GSA rate something that tim can do with Federal and other authorzied schedule users everyday. I understand the price reduction clause and my post was intended to support the thought posted by cajun. Your advice for contracting the GSA CO is the best route overall.

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tim,

The dialogue between Carl and I raised a question. Is your non-profit client a Federal agency or another organization outside the government? That affects the advice provided. Carl and I interpreted your client differently.

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tim,

The dialogue between Carl and I raised a question. Is your non-profit client a Federal agency or another organization outside the government? That affects the advice provided. Carl and I interpreted your client differently.

It would be a non-Federal organization.

One approach considered is coming up with a different pricing matrix so there is no tie in with the GSA schedule. The services being provided are not necessarily routine commercial services (i.e. plumbing, electrician, etc.) so there is alot of variability in the type of work being performed.

I'm not sure if this helps or not.

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If you do a lot of business with your GSA Schedule contract, you could end up with some large monetary penalities if you aren't careful. When you submitted your proposal to GSA, you disclosed sales data on various categories of customers and the associated rates/discounts. Now if you come up with a different pricing scheme and a GSA auditor later sees the new transaction as the same, GSA may take the position that it triggers the price reduction clause.

I would suggest again talking with the GSA CO. If you aren't totally comfortable and confident in your position, get the help of someone who's an experienced GSA expert.

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Many people (including many at GSA) focus purely on trigger iii of the Price Reductions Clause 552.238-75 (see para c below for what triggers a price reduction).

What Tim has described is a classic example of pulling trigger ii. Hence a price reduction is in order. However, have no fear. I know of no case where a contractor has been subject to false claims act damages under trigger ii as no one seems interested enough to pay attention to it. All the famous cases (where whistleblowers get rich) have all centered around trigger iii.

Future caution is advised to ensure you don't pull any more price reduction triggers.

© (1) A price reduction shall apply to purchases under this contract if, after the date negotiations

conclude, the Contractor ?

(i) Revises the commercial catalog, pricelist, schedule or other document upon which

contract award was predicated to reduce prices;

(ii) Grants more favorable discounts or terms and conditions than those contained in the

commercial catalog, pricelist, schedule or other documents upon which contract award

was predicated; or

(iii) Grants special discounts to the customer (or category of customers) that formed the

basis of award, and the change disturbs the price/discount relationship of the Government

to the customer (or category of customers) that was the basis of awar

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I am assuming that your MFC and your Basis Of Award (BOA), which can be different, are in this case the same classification (for profit entities). By giving a deeper discount to a different class of customer, this may create a new MFC.

If you are now giving non-profit entities a better price, they may now be deemed as the MFC. This would need to be disclosed when you prepare your next CSP-1 document (which could be at an Option, or at another time as your contract dictates). Now, although this new category of customer may end up being the new MFC, it may not in fact be the BOA if the buying patterns are different. This is definitely a discussion you should have with your GSA CO.

I have many times seen situations where the MFC and/or the BOA may change depending on the mandatory disclosures on the CSP-1 document. I have also seen where the MFC is not the BOA because the buying patterns are significantly different.

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