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F&R Determination based on Competition between Manufacturer and Distributors


TNT1

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Happy July 4th Weekend All,

 

The scenario is as follows: Prime contractor is issuing an RFQ to three companies: one is the manufacturer of part A, two are authorized distributors of part A. Is this indicative of adequate price competition as outlined in FAR 15.403-1(c)(1)?

 

My beginner's logic is telling me, maybe the offerors could be considered competing independently, if the distributor had significant inventory that was received based on bulk pricing or some other scenario. If we as the Prime adopt competition between manufacturer and distributor as always adequate, how foolish would we be?   

 

(i) A price is based on adequate price competition when—

                     (A) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement

 

 

BTW - thanks to the contributors for the laughs over past years (and future) reading this forum. 

 

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My analogy: It could be said that car dealers compete with each other with respect to the same exact vehicle. However, my initial thought is whether or not a specific car is named as the "sole source" and whether that is justified vs. competing among many many manufacturers/dealers of vehicles. For example, if a 1/2 ton pickup is justified as required, I would question the justification for competing this with Ford and its dealers vs many manufacturers and dealers of 1/2 ton pickups.  

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FAR 15.403-1(c)(1) exists for the sole purpose as an exception from the requirement for certified cost or pricing data.  But it is irrelevant to you -- you should rely on FAR 15.403-1(c)(3) instead as your exception.

If you're trying to establish price reasonableness, you have to go to FAR 15.404-1.  Instead of using price competition under FAR 15.404-1(b)(2)(i), use historical prices under FAR 15.404-1(b)(2)(ii).

Problem solved -- at least, if you are really buying a commercial item.  Get all the competition you can to help get the best price you can, but don't get hung up on whether or not you have adequate price competition -- it is irrelevant.  

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12 hours ago, TNT1 said:

If we as the Prime adopt competition between manufacturer and distributor as always adequate, how foolish would we be?   

"Always" maybe but sometimes not so foolish and ji20874 has given you some basic tenants that would help you adopt a sensible approach.   An approach that you would (should) solidify in your company policy and procedures.  I say this as FAR citations have been noted, and while they are  guiding ideals that might get passed along to a prime in a government contract, FAR 52.244-5, DFARs 252.244-7001 by example, that send you towards adopting FAR principles in general, your own P&P becomes your guide.  Noting as a backdrop to mention something that hit me in my read of your scenario/question.  It seems to point to a "price" only when in truth the government ideal (even an extent in sealed bid) for selecting a contractors price as fair and reasonable gives consideration to other stuff  such as quality, delivery, technical capabilities, and financial capabilities.   A couple of the latter it would seem probably come into play with regard to dueling manufacturer against multiple distributors.  Maybe not always okay as addressed in your policy and procedures but can be is the conclusion from my view.

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On 7/2/2021 at 6:51 PM, TNT1 said:

If we as the Prime adopt competition between manufacturer and distributor as always adequate, how foolish would we be?

I missed that the original poster is a prime contractor.

Yes, you would be foolish to adopt competition between manufacturer and distributor as always adequate.  

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