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I posted a RFQ for Commercial Services on FBO.  I receive four quotes that are acceptable.  The prices came in $1,050,000, $1,075,000, $1,125,000 and $1,175,000.  Programming only has $950,000 available for this project.  Is it acceptable to go to the lowest quote I have and ask them to reduce their price to $950,000 and send them the PO if they agree?  I am essentially counter offering their offer.  Thoughts?  

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Hello Maquoketa,

You can ask, but how would you feel if your boss ask you to do your job for $5 less an hour because the Government does not have funds to cover your salary?  The way to ask is through negotiations; I would ask the offerors to explain how they plan to meet your requirements; but now you are changing the acquisition method.

Acquisition Method - I would not have worked a million dollar IT services project as an RFQ, I would have used a RFP (FAR Part 15).

Fair & Reasonable Price Determination - You appear to have adequate competition, so the $1,050,000 price appears to be fair.  Do you have a basis to think the prices are not reasonable?  Is the requirement well defined?  Is there some ambiguities that need to be refined?  For example:  Would you allow a recent graduate from tech school to work on a Lamborghini?  The recent graduate will probably be the lowest quote, but you will, most likely, have to hire a Lamborghini-trained mechanic to fix what the inexperienced worker broke at a later date and at a much higher price tag.

Budget - The difference between the lowest quote and your budget is large.  I am assuming that you performed market research and that the IGE was done based on other than the budget you had available at the moment.  Did you post a RFI asking for current industry standards and practices?  Did you ask how the industry prices the services you require?  Did your market research and IGE point to a $950,000 price tag?  Did you invite the right vendors to offer?  If the requirements are well written and well understood you will most likely have to tell your Government customer to get the funds or restate the requirements with a lower scope.

Issue a Contract or Resolicit - Get the funds and issue the contract if you determine that the Government will receive what it requires at a fair an reasonable price.  You will need to delay issuing the contract until you get the funds.  Cancel the acquisition, redefine the requirements, and resolicit if you cannot make that determination.

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Guest PepeTheFrog
2 hours ago, Maquoketa said:

I am essentially counter offering their offer.

Remember, Maquoketa, you cannot counter any offers because you did not receive any offers.

You received quotes or quotations. You are free to make offers (in the form of purchase orders). The vendors are free to accept, reject, or counter those offers.

See the definitions of offer and purchase order in FAR 2.101.

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If you are in FAR Part 13 (or FAR Subpart 8.4), YES, you can talk to the already successful quoter and ask if it can sharpen its pencil on price without changing technical content.  Or, you can go back out to all four and say that all quotations received were higher than the available funds, and ask all four of them to submit updated quotations at lower prices.

If you are unable to get prices within your available funds, then you will have to amend your requirement (change the technical content) or cancel the acquisition.

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6 hours ago, boricua said:

Acquisition Method - I would not have worked a million dollar IT services project as an RFQ, I would have used a RFP (FAR Part 15).

Why?  I don't understand this desire to automatically jump to utilizing FAR Part 15 procedures when, for commercial items, the authority in FAR 13.5 exists.  How was using an RFQ the cause of this situation and what in FAR Part 13 prohibits the OP from resolving it?

Also the OP never states that these are IT services...the post states "commercial services."

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Open competition in the commercial marketplace has determined the price. The available budget is insufficient. Either cancel the requirement or get more money.

In my view the entire purpose of going to the marketplace to acquire commercial services is to provide assurance that the price is fair and reasonable. In this case there is no question about that. Trying to "negotiate" undercuts the entire philosophy of commercial item acquisitions.

I'm just saying.

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2 hours ago, here_2_help said:

Open competition in the commercial marketplace has determined the price. The available budget is insufficient. Either cancel the requirement or get more money.

In my view the entire purpose of going to the marketplace to acquire commercial services is to provide assurance that the price is fair and reasonable. In this case there is no question about that. Trying to "negotiate" undercuts the entire philosophy of commercial item acquisitions.

I'm just saying.

I couldn't disagree more. Next time you go by a car will you be accepting the lowest quoted price of the vehicle or will you bargain?

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Matthew your analogy is inapt. If I get a quote from a dealer on a new Ferrari and it's outside my price range, I'm not going to expect the Ferrari dealer to meet my budget. Instead, I'm not going to buy a new Ferrari because the price is outside of my budget.

Let me offer my analogy:

Next time I go to my auto mechanic and he tells me it will cost $500 for the repairs, I will either accept his quote or go find another auto repairman. I will not attempt to negotiate him down. The commercial price is the price.

And if I get 4 quotes from 4 auto mechanics for the same repair and they are all in the same range, I will either accept the lowest quote or not get my repairs done. I will not go back to the lowest price mechanic and tell him he can have my business if he can shave off 10%.

In summary:

There is no purpose in getting commercial item competition if you're going to ignore the pricing information provided by the commercial marketplace. If you're going to ignore that information, why not just go sole-source and negotiate a price? Why pretend the competition is a valid means of determining price reasonableness?

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Guest Vern Edwards
8 hours ago, here_2_help said:

Open competition in the commercial marketplace has determined the price. The available budget is insufficient. Either cancel the requirement or get more money....

The commercial price is the price.

H2H:

Spoken like an accountant, not a professional buyer or negotiator. I've gotten competitive quotes and then bargained with one or more of the quoters for a better price. The trick is knowing when and how to do it. Hell, I've just sent quoters a PO at a lower price and gotten some takers. 

What you said might be true for off-the-shelf products or items or for truly standard services, like an automobile oil change, but it's not even close to true for custom commercial work, and it might not be true for standard items and services under some market conditions.

Bargaining is possible even after the submission of competitive quotes and is sometimes appropriate. Smart bidders know that you don't necessarily have to quote your lowest price to win, and there is sometimes bargaining room even after competitive quotes. Some quoters won't bargain, but you won't know until you try.

Price reasonableness is not a precise map coordinate. Think of it as a field in which you can explore to find the best place to set up camp. There are many factors to be considered after receipt of competitive quotations.

What you posted is absurd as a general proposition.

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7 hours ago, here_2_help said:

Matthew your analogy is inapt. If I get a quote from a dealer on a new Ferrari and it's outside my price range, I'm not going to expect the Ferrari dealer to meet my budget. Instead, I'm not going to buy a new Ferrari because the price is outside of my budget.

Let me offer my analogy:

Next time I go to my auto mechanic and he tells me it will cost $500 for the repairs, I will either accept his quote or go find another auto repairman. I will not attempt to negotiate him down. The commercial price is the price.

And if I get 4 quotes from 4 auto mechanics for the same repair and they are all in the same range, I will either accept the lowest quote or not get my repairs done. I will not go back to the lowest price mechanic and tell him he can have my business if he can shave off 10%.

In summary:

There is no purpose in getting commercial item competition if you're going to ignore the pricing information provided by the commercial marketplace. If you're going to ignore that information, why not just go sole-source and negotiate a price? Why pretend the competition is a valid means of determining price reasonableness?

Please don't consider negotiation and competition mutually exclusive - they're not and, in fact, buyers are better off (personally and professionally) if they leverage both together rather than either independently/separately.

I don't understand how my analogy is inapt or any different than yours - in both of those cases (and in many others) I would take the opportunity to bargain for a better price.  For example, when buying a car or obtaining repairs from a dealership, a common metric that is used for employee bonuses these days is "customer satisfaction" (since wholesale/invoice prices are pretty easy to find through market research these days) - knowing that, I've been able to leverage (multiple times) additional discounts on the lowest quoted price in exchange for those maximum ratings (after all, my satisfaction is a function of receiving a quality product/service at a low price).  Try it next time you go to buy a car...or if you're ethically opposed to doing so, I'll gladly negotiate your next vehicle in exchange for keeping the difference between the lowest quoted price you receive and the amount I settle at. :)

Finally, I think Vern's comment regarding the concept of price reasonableness is spot on - a fair and reasonable price is not a price point, but rather a range of prices.  If you disagree, just consider how transactions in markets would have to occur if the converse were true...

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Vern and Matthew, I'll accept you are the professionals and not me.

I tend to think of competitive acquisitions of commercial items as sealed bidding. I know it's not, but I bias that way. Thus, I reacted to the OP as if somebody had conducted a sealed bid and then tried to negotiate a lower price. That was wrong of me.

My previous posts were based on my bias talking.

This is me walking my comments back.

H2H

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Guest Vern Edwards

In any process that is not sealed bidding, competition sets conditions for pricing, but never determines price.

Keep in mind also that the FAR Part 15 source selection process expressly provides for negotiations (discussions) after receipt of competitive proposals, permits auctioning under specified conditions, and requires solicitation of final proposal revisions. And when buying under Federal Supply Schedules, not even contractual agreement determine prices, since buyers are encouraged to seek even lower prices when placing orders.

The answer to the question of when to seek better prices after receiving competitive quotes and how to go about it depends on the rules applicable to the method of contracting and professional judgment.

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On 7/29/2016 at 1:16 PM, Matthew Fleharty said:

Why?  I don't understand this desire to automatically jump to utilizing FAR Part 15 procedures when, for commercial items, the authority in FAR 13.5 exists.  How was using an RFQ the cause of this situation and what in FAR Part 13 prohibits the OP from resolving it?

Also the OP never states that these are IT services...the post states "commercial services."

Hello Matthew Fleharty,

Services tend to be complicated enough that negotiations are necessary.  I will grant you that "Programming" might ask for something else other than IT services.

Thanks for the comment.

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34 minutes ago, boricua said:

Hello Matthew Fleharty,

Services tend to be complicated enough that negotiations are necessary.  I will grant you that "Programming" might ask for something else other than IT services.

Thanks for the comment.

The OP does not say the services are programming services, he just states they are "commercial services" and later calls the requirement a "project."

"Programming" is the entity with the money (i.e. the customer/program office...) - re-read the sentence and see if we agree or not:

On ‎7‎/‎29‎/‎2016 at 5:38 AM, Maquoketa said:

Programming only has $950,000 available for this project.

 

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I wanted to update everyone on the outcome.  I have a signed PO in place for $954,720.00.  The contractor made this statement: Here is the signed SF 1449. Thank you so much for this opportunity to work with you and your team.

It appears we have a win, win.

Thank you everyone for your feedback on the topic.  I had a gut feeling that the IGE was good and that there was room for the vendor to come down.  I know a lot of contract specialist that will just run back to the programming office and ask for more money without ever consider negotiating first.  I never forget that I am a guardian of taxpayer funds.

Thanks again everyone.

 

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Makquoketa , congratulations and BRAVO for making the effort. By the way, I've been told by contractors and have read that one should never simply assume that initial quotes or offers represent the firms' best and final prices in negotiated procurements.  

I took a business law class at night school many years ago, where the prof made the point that offered or even published prices or price tags don't mean that you can't try to negotiate a better deal.  "Everything is negotiable" (except bid prices -generally and there are exceptions there, too).

A fellow contract administrator in my old construction office in Saudi Arabia, who was Korean, once told me that he couldn't get over the fact that Americans tend to simply accept prices offered without negotiating better deals. He said that Koreans will negotiate for everything  (ala, the chase scene through the souks/bazaar in the Monty Python movie "The Life of Brian").

 

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Guest Vern Edwards
1 hour ago, Maquoketa said:

I wanted to update everyone on the outcome.  I have a signed PO in place for $954,720.00.  The contractor made this statement: Here is the signed SF 1449. Thank you so much for this opportunity to work with you and your team.

You probably coulda got it for $900,000. -_-

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