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Affiliated Companies and the Certificate of Independent Price Determination


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Does FAR 52.203-2 permit affiliated companies to discuss pricing with each other and then each submit bids to the same solicitation? If the affiliates struck (a)(2), could the affiliates prepare a signed statement explaining their reasons in line with 52.203-2©?

If you have any experience making or reviewing such statements, I'd greatly appreciate your thoughts on what must be included in order to satisfy the CO.

Thanks,

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Guest Vern Edwards

What does "discuss" mean? What, specifically, have they discussed and to what end? Why are they discussing pricing?

What does the statement say?

How do you expect us to answer based on such generalities?

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Does FAR 52.203-2 permit affiliated companies to discuss pricing with each other and then each submit bids to the same solicitation? If the affiliates struck (a)(2), could the affiliates prepare a signed statement explaining their reasons in line with 52.203-2©?

If you have any experience making or reviewing such statements, I'd greatly appreciate your thoughts on what must be included in order to satisfy the CO.

Thanks,

www

Have you read FAR 3.103-2(b )(2)?

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Thank you. To clarify:

What does "discuss" mean? What, specifically, have they discussed and to what end? Why are they discussing pricing?

The affiliates have not discussed anything yet, because they want to make sure they are not violating any regulations. The solicitation contains multiple requirements and each affiliate has strengths that respond to different requirements. Because each is 100% owned by a parent, they and the parent are trying to determine whether it would be better to bid as a team or separately, if they bid at all. The parent, as much as is permitted, would like to make sure the pricing is consistent and practical. In such case, it seems like a legitimate business interest to discuss pricing – if only to answer the basic questions of “at what pricing can we meet the requirements and make it financially worthwhile?” and “how much resources should we put into bidding on this work?”

The discussions about pricing would not be “for the purpose of restricting competition,” as referenced in 52.203-2(a)(1). In addition, neither affiliate would make any attempt “to induce any other concern to submit or not to submit an offer for the purpose of restricting competition,” as referenced in 52.203-2(a)(3). That leaves 52.203-2(a)(2): “The prices in this offer have not been and will not be knowingly disclosed by the offeror, directly or indirectly, to any other offeror or competitor before bid opening (in the case of a sealed bid solicitation) or contract award (in the case of a negotiated solicitation) unless otherwise required by law.”

If the parent and affiliates discuss pricing, then such prices could arguably be “knowingly disclosed by the offeror, directly or indirectly, to another offeror/competitor,” to the extent that the affiliate is a “competitor,” despite the general principle that affiliates are not competitors as stated in the Supreme Court decision in
Copperweld.
Nonetheless, both affiliates would be offerors.

However, 52.203-2© appears to allow an offeror to delete or modify 52.203-2(a)(2) , as long as it explains why. 52.203-2© states “If the offeror deletes or modifies paragraph (a)(2) of this provision, the offeror must furnish with its offer a signed statement setting forth in detail the circumstances of the disclosure.”

What does the statement say?

There is not statement yet. Any discussions of the affiliates and parents – and thus any statement - will be guided by what is permitted by the regulations.

If it is permitted for affiliates to discuss pricing frankly, then the statement could say “Offeror A developed its pricing in conjunction with its 100% affiliate, Offeror B.”

If developing pricing in conjunction with another offeror, even an affiliate, is forbidden, then they might simply disclose the pricing to each other, in which case the statement might say “Offeror A disclosed its pricing to its 100% affiliate, Offeror B.” If making such disclosure and the subsequent statement will cause trouble for the affiliated offerors , then they won’t even do that.

In any case, it seems that because each has the same parent, then there is the chance for “indirect” disclosure by one affiliate to the other. In such case, the statement might say ““Offeror A disclosed its pricing to its parent company, which is the sole shareholder of Offeror B, and thus could be considered to have indirectly disclosed its pricing to Offeror B.”

In each case, the goal is to make a full explanation to the CO and allow the CO to determine that the disclosure was not “made for the purpose of had the effect of restricting competition” under 3.103-2(
B)
(2).

It would be helpful to know what standards the COs follow in making that determination.

Thanks!

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Guest Vern Edwards

Here is my best advice:

1. The affiliates should not discuss prices or pricing in any way. That way they'll avoid real and perceived violations. Perceptions can be as bad as reality in this business. However, I understand why this advice is not particularly helpful in your circumstances.

2. If they must discuss prices and pricing, seek and follow the advice of an attorney in a government contracting practice.

I know you wanted something a little more specific and helpful, but I'm leery of saying anything that could be taken as legal advice.

Best of luck to you.

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