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Evaluation of conditional discounts (volume discounts)

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Is the Government really this ill-equipped to handle a volume discount? I would think a reasonable evaluation of price could include some sort of weighted average price, given the estimated likelihood of exercising a given option, or buying a certain volume.

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2 hours ago, RightSaidFed said:

Is the Government really this ill-equipped to handle a volume discount?

 It would appear so.  

We don’t know what the instant solicitation says or if Provision 52.215-1 (specifically paragraph (c) (4) )is in it. 

“(4) Unless otherwise specified in the solicitation, the offeror may propose to provide any item or combination of items.”

Most of the solicitations that I have ever been involved with do require pricing for all items. But I have never seen where it prohibited pricing for combinations of items.

So far herein, nobody seems to be able to  describe how it is possible to evaluate any offer with alternative pricing for a combination of items. It seems clear to me that it is allowed, unless prohibited and it is possible to evaluate it.

I brought up the possibility of offering price for a combination of items. So far nobody in this thread seems to know what that means or what paragraph (c)(4) means. 

 I suggested that the potential proposer ask the government if they would except discounts for combination offers. In addition, I suggested how the potential proposer could ask for confidentiality before describing his idea,  On the basis of competitive strategy..

An alternative which may work, is to submit a separate proposal with only pricing of a combination of items.  

Theoretically, it should be relatively simple for a potential proposer to inquire and find out whether multiple proposals are acceptable.

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Years ago, It wasn’t uncommon in my local organization for pricing of optional items to have proposers identify alternative package pricing of the options. 

Before that (70’s through early 90’s), we used “additive alternate” bid items for pricing combinations of items. 

We were then told to use options instead of additive alternates. “They are easier to use”.

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On ‎10‎/‎18‎/‎2018 at 5:12 AM, RightSaidFed said:

Is the Government really this ill-equipped to handle a volume discount?

The government is well equipped to handle volume discounts if that is what they are looking for.   In the case at hand the government wants optional items based on specific needs yet the offeror wants to not only try and meet the needs of the government by offering on the optional items the offeror wants to change the game to offer pricing that guarantees a certain volume that would be priced on a volume discount ideal and if that certain volume is not accomplished the volume discount would not apply. 

If the government likes the idea of the offeror it could change to accommodate all offerors pricing on a volume discount or possibly even accept the offerors offer without accommodating offers from all others on the same basis with the rub that if government tips to changing its ideal of optional items based on need to contingent pricing based on volume ideal the risk is that other offerors might feel the government changed the game without letting them know.

On ‎10‎/‎18‎/‎2018 at 5:12 AM, RightSaidFed said:

I would think a reasonable evaluation of price could include some sort of weighted average price, given the estimated likelihood of exercising a given option, or buying a certain volume.

Doing so would in my view change the governments intent from wanting something on an optional basis to wanting volume discount pricing.

Consider as well FAR 17.206 –

 (a) In awarding the basic contract, the contracting officer shall, except as provided in paragraph (b) of this section, evaluate offers for any option quantities or periods contained in a solicitation when it has been determined prior to soliciting offers that the Government is likely to exercise the options. (See 17.208.)

(b) The contracting officer need not evaluate offers for any option quantities when it is determined that evaluation would not be in the best interests of the Government and this determination is approved at a level above the contracting officer. An example of a circumstance that may support a determination not to evaluate offers for option quantities is when there is a reasonable certainty that funds will be unavailable to permit exercise of the option.

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On 10/18/2018 at 9:06 AM, joel hoffman said:

I brought up the possibility of offering price for a combination of items. So far nobody in this thread seems to know what that means or what paragraph (c)(4) means. 

Carl, can you please tell me what it means?

if it means what I think it means then all other firms can also offer discounts for certain combinations under the current terms of the competition. 

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51 minutes ago, joel hoffman said:

Carl, can you please tell me what it means?

Joel - We discussed this in exchanges on October 1 in this discussion thread.  As I said some may see it as you do yet I am not convinced.   I will just leave it at that.

 

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2 hours ago, C Culham said:

Joel - We discussed this in exchanges on October 1 in this discussion thread.  As I said some may see it as you do yet I am not convinced.   I will just leave it at that.

Carl, I’m not asking you to agree. I asked what prices for a combination of items means to you.  You called offering alternate prices for combinations of items “contingent pricing” but you haven’t explained what a combination of items might look like.  

Lotus gave a price for each item and then would offer lower individual prices for two of the items in combination with another item. It’s simple and straightforward. 

If it isn’t prohibited in the solicitation, the provision says offering combinations of items is allowed. It doesn’t prescribe how that has to be done. It doesn’t say that the government has to define or prescribe combinations of items or how to price them. 

Maybe all Lotus has to do is change the wording of the alternate pricing to say that Item XXX would be $xxx dollars in combination with award of CLIN YYY at the stated price for CLIN YYY.

...and reference paragraph (c)(4) of  Provision 52.215-1

If lotus submits a separate proposal, I would recommend using a term akin to “in combination with item xxx at the stated price for item xxx..” as I described above. 

And reference the paragraph in 52.215-1...

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4 hours ago, joel hoffman said:

You called offering alternate prices for combinations of items “contingent pricing”

Joel - No I did not.  Please go back and re-read my posts.  I attempted to explain that offering pricing on a combination of items was different than conditioning a price on two of the items (8&9) based on some event that event being the ordering of another item (7).  

 

4 hours ago, joel hoffman said:

Carl, I’m not asking you to agree

Yes you are.  I do not see the wording of pricing combination of items found in 52.215-1 as having any applicability to OP's situation.  You do but I do not agree.

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 So, you do not think that it is a “combination of items”. I am still asking: What is an “offer for a combination of items“?   Why do you keep avoiding answering my question? You keep telling me what it isn’t. 

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On 10/18/2018 at 10:06 AM, joel hoffman said:

“(4) Unless otherwise specified in the solicitation, the offeror may propose to provide any item or combination of items.”

   *   *   *

I brought up the possibility of offering price for a combination of items. So far nobody in this thread seems to know what that means or what paragraph (c)(4) means. 

It seems easy to me.  One possible reading:  if the solicitation asks for CLIN 001, 002, and 003, an offeror could propose to provide any of the following—

- CLIN 001

- CLIN 002

- CLIN 003

- CLIN 001 and 002

- CLIN 001 and 003

- CLIN 002 and 003

Another possible reading:  if a solicitation asks for ten tractor-trailer sets in a single CLIN, an offeror could propose to provide only trailers.

None of the above is an alternate proposal.

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10 hours ago, ji20874 said:

It seems easy to me.  One possible reading:  if the solicitation asks for CLIN 001, 002, and 003, an offeror could propose to provide any of the following—

- CLIN 001

- CLIN 002

- CLIN 003

- CLIN 001 and 002

- CLIN 001 and 003

- CLIN 002 and 003

Another possible reading:  if a solicitation asks for ten tractor-trailer sets in a single CLIN, an offeror could propose to provide only trailers.

None of the above is an alternate proposal.

Thanks, ji.  But, Gee. Aren’t those combinations “contingent” upon award according to the combinations? 

Just kidding. 

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12 hours ago, joel hoffman said:

Aren’t those combinations “contingent” upon award according to the combinations? 

So Joel is this different than ji's illustration or is it the same?

CLIN 001

- CLIN 002

- CLIN 003

- CLIN 001 and 002 and my price is $100 for each but if you do not award me CLIN 003 my price is $130

- CLIN 001 and 003 and my price is $100 for each but if you do not award me CLIN 002 my price is $130

- CLIN 002 and 003 and my price is $100 for each but if you do not award me CLIN 001 my price is $130

And for clarity get off the "contingent" band wagon.  I stated and have clarified to you several times that the pricing proposed by the OP could be viewed as "material defect with regard to pricing by adding a condition that is not stipulated in the contract line item schedule"

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4 hours ago, C Culham said:

And for clarity get off the "contingent" band wagon.  I stated and have clarified to you several times that the pricing proposed by the OP could be viewed as "material defect with regard to pricing by adding a condition that is not stipulated in the contract line item schedule"

Yes it could be viewed that way by someone who doesn’t know better. 

The OP offers a price for each CLIN, as probably was required by the Solicitation instructions. 

Then the Op offers a lower price for the second and third option, if the first option is awarded. That is offering two combinations. The provision doesn’t require that the line item schedule stipulate a combination discount. In order to offer one. And state that it is being done consistent with 52.215-1 (c)(4). 

If it is a Part 15 source selection , I don’t think that the government may reveal an offerors pricing strategy without its permission.  In my opinion, that would amount to transfusion of one competitors ideas  and improper disclosure of source selection information (see definition of source selection information in 41 USC Chapter 21, Section 2101).

it might be safer to separately price the discounts below the stated line items, like ji did. 

If the government knows that it can’t or won’t be able to award the first option, it knows the OP’s prices. 

If it intends to award the first option, it knows the prices for the other two options. 

If it will or might award the first option but not the other two, it knows the OP’s price for what it will or might award. 

The combinations are clear to the government. It’s not confusing. 

The government is free to take advantage of an offered discount or not to. 

If it is a Part 15 source selection , I don’t think that the government may reveal an offerors pricing strategy to other competitors without its permission.  In my opinion, that would amount to transfusion of one competitor's ideas  and is improper disclosure of source selection information (see definition of source selection information in 41 USC Chapter 21, Section 2101 at definition (7). I suggest marking it as restricted from disclosure per 52.215-1, (e) (1) and (2).

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On 10/20/2018 at 11:22 AM, ji20874 said:

Another possible reading:  if a solicitation asks for ten tractor-trailer sets in a single CLIN, an offeror could propose to provide only trailers.

None of the above is an alternate proposal.

ji, I wasn’t asking about the first part of the paragraph (c)(4). I’m assuming ( here)  that the solicitation requires a price for each CLIN. What is in question is what an offer for a combination of items is. 

Here, there is a price for each line item, including three identical options.The OP takes no exceptions to the conditions. It has priced all the required items.

Then OP offers lower prices for two other identical options if the government awards the first listed option. Those are two combinations of items. The government stated that it could award any or all the options. The government has said that it is free to decide what if any options it will award. 

EDIT:  Let’s also be clear that Lotus stated in the original post that any one of the options, if awarded by itself, would need to carry a higher price. Its apparent that Lotus would have to recover certain fixed or one time costs to provide any one of the identical option quantity of the items. There is no guarantee that the government would award the first option by itself or with another option.

 Thus, a proposer would have to cover its risk if the government selected only the second or third option, skipping the first option. 

Sure , Lotus wants to be competitive.  Lotus also is saying that there is no need to charge the government two or three times for those fixed or onetime costs if it orders two or more options. Lotus wants to offer a win-win combination pricing arrangement. 

 I doubt that the government understands that the way they set up the options, as any or all of identical items, it is likely that the proposers will not be willing to risk offering reduced prices for award of any one of multiple options.

Lotus doesn’t want to ask the government, in order to avoid showing his/her hand. Lotus anticipates that the government may then amend the solicitation to encourage all proposers to allocate the fixed or one time costs to one line item. Lotus would then  lose a possible competitive advantage.  Fair enough. 

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On 10/18/2018 at 7:12 AM, RightSaidFed said:

Is the Government really this ill-equipped to handle a volume discount? I would think a reasonable evaluation of price could include some sort of weighted average price, given the estimated likelihood of exercising a given option, or buying a certain volume.

RSFed, from Lotus’s description of the solicitation language, it would appear that the government doesn’t want to be boxed in by prioritizing the option list for identical items and quantities. It may have decided to discourage “gaming” of the option prices by stating that it reserves the right to select any or all options in no particular order. 

The problem is that in order to recover their one time costs to provide the first quantity, proposers may likely have to include those same costs in each of the three identical option items. At least that is the sense that Lotus appears to have of the situation.

The government doesn’t appear to realize that there may be economy of scale in the purchase of more of the same items. Unfortunately, it didn’t consider that in design of the CLIN schedule in the solicitation. 

That may be why 52.215-1 (c)(4) allows proposers to offer combinations of items.  Let competition encourage ingenuity, when the government doesn’t always see opportunities for savings. 

I saw that frequently from the local and expat firms  in our mid 90’s end of year rush of IFB’s and RFP’s for military O&M funded projects in Panama and Central/South America. They were all advertised, subject to availability of (literally) last minute year end funding. The PM’s, Finance and Accounting and Contracting worked until midnight, local time on 30 Sep. The Army and Air Force commands were MIPRing in funds as they identified them at the last days and hours. 

In later years, the USACE Pacific Ocean Division awarded projects for the other USACE Districts until midnight, Honolulu time on 30 Sep. 

Those firms located or working in Central/South America  would often offer discounts for combinations of optional bid items or even for combinations of multiple contract awards or multiple bid schedule awards. This was done separately from the advertised CLINs in the schedule by adding explanatory wording. 

it was a win-win routine. The Military needed the projects and there was intense competition for the next year’s workload for those firms. 

Not all projects were funded but everyone knew the situation and participated,

I sometimes become discouraged at the seeming lack of imagination and creativity by some contracting personnel and project managers for anything other than simplying their jobs, cutting their workload,  avoiding discussions, not bargaining for better performance or better pricing and fear of  “possible protests”.

Shame on the instant contracting office if they reject legitimate discount pricing for combinations of items for multiple options. Why would they offer three identical options if they didn’t want more quantities, if affordable and within the budget?  The solicitation provision at 52.215-1 certainly appears to allow for that, even if the government didn’t realize that strategy when it set up the CLIN schedule. 

I say, go for it with a separate proposal, Lotus and see what happens!  Good luck. 

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1 hour ago, joel hoffman said:

I sometimes become discouraged at the seeming lack of imagination and creativity by some contracting personnel and project managers for anything other than simplying their jobs, cutting their workload,  avoiding discussions, not bargaining for better performance or better pricing and out of fear of  “possible protests”.

While I agree with ye meesage, me thinks yarr, "being a bit too hard on the Beaver."  Ye can't discount the pressure on the contracting office to speedily get things on contract for the   land-lubbin' program office.  In me experience, schedule takes precedence above all else a little too often as a result.  Avoidin' a protest at all costs may have ye partin' with a few more doubloons but it keeps ye on schedule.  All me experience is sole-source so I may be jibber-jabbin' out of me swim lane.

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6 hours ago, Contracting Pirate said:

While I agree with ye meesage, me thinks yarr, "being a bit too hard on the Beaver."  Ye can't discount the pressure on the contracting office to speedily get things on contract for the   land-lubbin' program office.  In me experience, schedule takes precedence above all else a little too often as a result.  Avoidin' a protest at all costs may have ye partin' with a few more doubloons but it keeps ye on schedule.  All me experience is sole-source so I may be jibber-jabbin' out of me swim lane.

 Aye, Matey!  The office that I was in charge of was responsible for all negotiated acquisition both competitive and sole source. I enjoyed negotiating contracts, modifications, claims, termination settlements, takeover agreements, etc.

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