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MDJohn

Can giving a discount from stated contract prices cause problems?

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Equipment vendor enters a 60-month Blanket Purchase Agreement with a DOD agency. Under the BPA, equip lease pricing is based upon length of the equip lease term. $X/mo for a 60 months lease; X+1/mo for a 48 months lease; X+2/mo for a 36 months lease, etc. The longer the lease term, the lower the price/mo.

15 months later a new location of the DOD agency wants to participate under the existing BPA. The vendor wants to give the new location the rate applicable to a 60 month lease during the remainder of the BPA, even though the quoted rate in the BPA for 48 mo equip rental is higher.

Will the vendor get himself into trouble by deviating from the BPA pricing to give the new location a discount? In otther words, will the grant of a discount to the client (the DoD agency) from the stated pricing terms of the BPA for a 48 month lease open the vendor up to a complaint that it overcharged for the 60 month lease and thus owes the client a discount for the amount the client paid to date under the 60 month lease in the first location?

Thanks.

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Will the vendor get himself into trouble by deviating from the BPA pricing to give the new location a discount? In otther words, will the grant of a discount to the client (the DoD agency) from the stated pricing terms of the BPA for a 48 month lease open the vendor up to a complaint that it overcharged for the 60 month lease and thus owes the client a discount for the amount the client paid to date under the 60 month lease in the first location?

Absent specific language in the BPA that covers this situation, then I would say no. BPAs of the type described in FAR 13.303 are typically not contracts--they are charge accounts created to fulfill anticipated repetitive needs of low-dollar value (i.e., "purchases"). As such, the parties are free to deviate from the terms of the BPA when it comes to making individual purchases. The client who paid the BPA price would not have a contractual right to a price reduction just because a different client got a better price under a different purchase. The client may complain, but the vendor wouldn't "owe" them anything.

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Sorry, new info. Finally got a copy of some of the documentation and see that the vendor has a FSS (GS schedule) for the equipment and that, pursuant to GS schedule, the Veterans Administration issued a BPA to the vendor. Now, another location of the VA is issuing a contract amendment to the vendor under FAR 52.212-4 to add itself to the BPA and set forth the lease terms.

Because the cost of the leased item is over the SAT, tt seems to me that under FAR 8.405-4, the new VA location must ask for a price reduction and that the vendor is not required to pass the discount on to all schedule users. (cite below.)

Given the byzantine nature of some of the regs, I must ask: are there other regs relevant here that could cause a pitfall?

8.405-4 Price reductions.

Ordering activities may request a price reduction at any time before placing an order, establishing a BPA, or in conjunction with the annual BPA review. However, the ordering activity shall seek a price reduction when the order or BPA exceeds the simplified acquisition threshold. Schedule contractors are not required to pass on to all schedule users a price reduction extended only to an individual ordering activity for a specific order or BPA.

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I don't know of any, but I'm somewhat ignorant in the area of Federal Supply Schedules. The only potential liability for the contractor that I see is if the contract contains a price reduction clause that is triggered if one Government customer receives a better price than another. Given the last sentence at FAR 8.405-4, it seems that such a clause would be unusual.

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The FSS's Price Reduction Clause is not triggered by sales to federal agencies (see GSAR 552.238-75). You are correct in that the VA must ask for a larger price discount, and also correct in that the contractor is not required to provide it.

I would recommend that the terms of the BPA be read and understood, as if there are any pricing specifications, it should be stated within this document. I would hope that the CO would use the potential of the increased coverage/sales as leverage to negotiate an additional discount, incorporate that into the BPA, and thereby pass the additional savings on to all the authorized BPA users.

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