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Fair and Market Price???


CSJK2021

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Question, if 5 SDVOSB distributors for a particular item quotes 65% over the manufacturer price, is it sill considered fair and reasonable? Would that justify me to go sole source to the manufacturer? Is there any guidance I can use? Please advise. Thank you, still a baby federal contracting specialist. 

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18 hours ago, CSJK2021 said:

if 5 SDVOSB distributors for a particular item quotes 65% over the manufacturer price, is it sill considered fair and reasonable?

The fact that the quotes all exceed the manufacturer's price by a certain percentage does not make the price reasonable or unreasonable.  You need to look at why the quotes are what they are and if they are reasonable in light of all the circumstances.  In this regard, have you done market research to determine what similar items might cost in the market place?

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  • 1 month later...
On 11/21/2019 at 4:11 PM, CSJK2021 said:

Question, if 5 SDVOSB distributors for a particular item quotes 65% over the manufacturer price, is it sill considered fair and reasonable? Would that justify me to go sole source to the manufacturer? Is there any guidance I can use? Please advise. Thank you, still a baby federal contracting specialist. 

65% over manufactures price fair and reasonable (F&R)? 

Maybe . . .  

GAO Case B-278371:

" . . . in view of the congressional policy favoring small businesses, contracts may be awarded under small business set-aside procedures to small business firms at premium prices, so long as those prices are not unreasonable." (EA)

GAO Case B-209234:

" . . . IN VIEW OF THE CONGRESSIONAL POLICY FAVORING SMALL BUSINESSES, A FAIR PROPORTION OF GOVERNMENT CONTRACTS MAY BE AWARDED TO SUCH FIRMS, EVEN AT PREMIUM (ALBEIT REASONABLE) PRICES." (EA)

Maybe Not . . . 

GAO Case B-415818:

"The VA received quotations from four SDVOSBs, the lowest of which was 42 percent higher than the agency’s independent government cost estimate (IGCE). Id. The contracting officer concluded that none of the prices obtained were fair and reasonable, and canceled the RFQ." (EA)

At the end of the day it is the COs determination of F&R that will stand, as long as there is a reasonable basis for the determination. There is a lot of case law out there on this. These are just some that I had readily available. 

Personally, I would not determine it to be fair and reasonable, but my name and warrant number is not going on the award document. 

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6 hours ago, Constricting Officer said:

GAO Case B-278371:

" . . . in view of the congressional policy favoring small businesses, contracts may be awarded under small business set-aside procedures to small business firms at premium prices, so long as those prices are not unreasonable." (EA)

 

 In addition, see the bold italic continuation from the excerpt from the WIFCON at http://www.wifcon.com/pd19_202.htm

“We have recognized that, in view of the congressional policy favoring small businesses, contracts may be awarded under small business set-aside procedures to small business firms at premium prices, so long as those prices are not unreasonable. Hardcore DuPont Composites, L.L.C., B-278371, Jan. 20, 1998, 98-1 CPD ¶ 28 at 3. The determination of whether a small business price premium is unreasonable depends on the circumstances of each case, Olsen Envtl. Servs., Inc., B-241475, Feb. 6, 1991, 91-1 CPD ¶ 126 at 2-3, and we have found cancellations proper where the protester’s price exceeded the government estimate by as little as 7.2 percent. See Building Maint. Specialists, Inc., B-186441, Sept. 10, 1976, 76-2 CPD ¶ 233 at 4.”

 

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baby federal contracting specialist,

We don't know if you're doing an open market buy, or an order from existing multiple-award IDIQ/schedule contract situation, or what...

And we don't know if you're under the SAT or over the SAT, or what...

And we don't know if you are using a J&A/SSJ/LSJ/JEFO...

But, let me try to be helpful -- assuming you have concluded that you can get the item from the manufacturer and that the distributors' prices are unreasonable...

Is your current procurement a set-aside (such as contemplated by FAR subpart 6.2) or other-than-full-and-open competition (such as contemplated by FAR subpart 6.3)? 

If your procurement is an open market set-aside (such as contemplated by FAR subpart 6.2), and the set-aside fails to provide you with an awardable outcome, you may consider the set-aside to be automatically dissolved and you may re-solicit unrestricted -- see FAR 19.507.  The FAR does not require any approval above the contracting officer level for this, or any coordination with your small business office -- the contracting officer is free to issue the new solicitation today (however, I don't know about your agency regulations).

If your requirement is other-than-full-and-open competition (such as contemplated by FAR subpart 6.3), and you thought that soliciting from 5 SDVOSB distributors would constitute soliciting as many sources as practicable IAW FAR 6.301(d), and you didn't get an awardable result, then yes, you may widen the net and re-solicit -- you might have to update your J&A document -- I would include the manufacturer and the 5 SBVOSB distributors in the re-solicitation. 

If you are working under a schedule contract or multiple-award IDIQ contracts, well, does the manufacturer hold one of the contracts?  If yes, then the same thought process as above applies in a general sense. 

Do you want to go sole-source to the manufacturer, or competitive?

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I would urge you to consider also the US taxpayers...

As a steward of the taxpayers, If you can purchase the item for 65% less, why not do it?  Will the manufacturer submit a bid if you go open market or from a schedule?

Business sense...

 

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Since all five are way over the manufacturers price, there may be more to it.  Lots of things can account for higher distributor/dealer prices like transportation, installation, warranties, technical support, and no cost maintenance over a long period.  In other words, the manufacturer may not be including some things dealers are.  Ask questions.

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You haven’t indicated if it is possible to purchase the item from the manufacturer at the “manufacturer’s price”. 

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