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Brand Name Specific Supplier Providing Varying Pricing to Offerors


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#1 OldHickory

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Posted 23 February 2012 - 11:57 AM

The Government requested best-value proposals under an existing task order to renovate a building. This particular RFP called for electrical gear to be matching-to-matching to the existing electrical gear and specified the brand name, make and model of the electrical gear to be used. We'll call the manufacturer of this electrical gear "Alpha Electrical" for the purpose of this inquiry.

We decided to self-perform the electrical work on the project and got a price from Alpha for the electrical gear required by the RFP for $3.4M. After turning in the proposal yesterday, we learned from another contractor who decided not to submit a proposal that Alpha quoted them a price for the same gear for $3.6M. That contractor decided not to submit a proposal when he found out that a competitor had been quoted a price from Alpha for the exact same gear for $2.4M.

The electrical gear is not a separate line item within the proposal, so we doubt if the CO will know that the vast swing in the offered prices results from Alpha's screwy pricing practices. While I have some suspicions, I won't speculate as to why Alpha is doing this.

My question is this: When the government requires brand specific equipment to be used with no alternatives permitted, what recourse, if any, does an offeror have if that brand-name supplier provides pricing for one offeror that is 65% more than the pricing for another offeror after the proposals have been submitted? We didn't protest or otherwise question the need for the brand specific electrical gear at proposal time because we didn't have a reason to believe an alternate was available (and we still don't).

Any insight you may have on this unusual issue would be appreciated.

#2 Vern Edwards

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Posted 24 February 2012 - 10:02 AM

My question is this: When the government requires brand specific equipment to be used with no alternatives permitted, what recourse, if any, does an offeror have if that brand-name supplier provides pricing for one offeror that is 65% more than the pricing for another offeror after the proposals have been submitted? We didn't protest or otherwise question the need for the brand specific electrical gear at proposal time because we didn't have a reason to believe an alternate was available (and we still don't).


I won't address the brand name issue since you didn't protest it. You seem to be complaining about discriminatory pricing in the commercial marketplace. To the best of my knowledge, that is not grounds for a protest if the government was not involved in the discrimination. I don't think you have any recourse about that under government contracting regulations.

#3 Whynot

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Posted 24 February 2012 - 10:59 AM

It is possible that nothing sinister is taking place – sometimes vendors that support more than one prime contract bidder, for non disclosure purposes, have separate response teams that are firewalled from each other. It is possible that separate bid teams within a single vendor generate different prices.

I have found that as a prime contract bidder that you have work with a vendor to get the best pricing from them. Sometimes it is like asking twenty questions – what do need from me to get your best price. Terms, quid pro quo, whatever. Not to say you just took a quote and ran with it, but a quote is just the start.

#4 OldHickory

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Posted 24 February 2012 - 12:57 PM

Thanks for your comments, Vern and Whynot. I was pretty certain we don't have any recourse under the contracting regs, but thought it was worth a shot to ask around anyway. Nevertheless, I don't necessarily agree with you, Whynot. I seriously doubt a game of 20 questions would have gotten this supplier down on its price by 66%. I am very familiar with vendor practices of providing preferential prices to certain customers. But, a 66% difference in price? It's just very hard for me to buy that (excuse the pun).

#5 OldHickory

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Posted 24 February 2012 - 01:08 PM

Just to elaborate on that last point, it's irksome and frustrating that this supplier knows that the Government is requiring exclusive use of its electrical gear, and that the cost of this gear is the substantial part of the price. Thus, the supplier has in essence placed itself in the position of determining the awardee by virtue of its ability to name its price among the competitors. That just doesn't appear to be fair, just or otherwise in the competitive spirit of the contracting regs.

#6 Vern Edwards

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Posted 24 February 2012 - 02:48 PM

Next time, protest the government's specification before the date proposals are due.

#7 Whynot

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Posted 24 February 2012 - 02:50 PM

Brand name acquisitions are not considered all that competitive and require non-competitive justiification.

Your situation is curious.

I assume from you posts that at the time you analyzed the quote and determined it to be a fair price to you – otherwise you would have worked with the vendor to get a lower price or not bother to bid or notify the CO or have done something prior to submitting.

So, if your price from the vendor is a fair price then the price to the winning bidder must be a very good price – almost absurdly so. I agree that it is hard to reconcile the price delta. No one intentionally leaves that much money on the table. It seems the objective (slam dunk win for the other bidder) would have been achieved with a much lower price delta.

However, if all else being equal and you received a bad price (above market) and none of your efforts resulted in getting a fair price then I am not so sure you can’t stir up some trouble for the vendor. Not so much to find a remedy but I would nonetheless want to get to the bottom of it and find out what is going on. You never know what you will dig up. Good hunting.

#8 joel hoffman

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Posted 24 February 2012 - 06:08 PM

OldHickory, while sellers may offer different prices or discounts, there may be limits or situations where it isn't considered legal. According to my 1980 and very likely outdated UCC Business Law textbook edition, there were laws that prohibit price discrimination between different buyers of commodities where the effect of such discrimination may be substantially to lessen competition or to restrain trade (e.g., the Sherman Anti-trust Act).

I don't know whether such apparently wide discrepancies in prices offered to different buyers are legal or not. Collusion, restraint of trade or some other typing of price fixing might also be very difficult to prove. If you seriously suspect something or just want to know what type - if any- limits can be put on price discrimination in such cases, I'd advise you to contact a good business law lawyer for advice, regardless of what FAR says.

As for government procurement personnel, they wouldn't have any direct way of knowing that those practices you described occurred. Unless reported to one of the (not always so highly competent criminal investigative agencies) - they probably won't know any more than you or me if they are improper or illegal trade practices. Then - the Department of Justice is busy enough not to bother with many instances where alleged illegal activities occurred, unless it is worth the effort and cost to pursue.

After reading this thread, I went to my old textbook because I remembered my prof from that 1983 night class discussing certain illegal pricing practices that I had never even dreamed of. There may or may not have been be something improper going on.

P.S. , I'm not a lawyer.

#9 Vern Edwards

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Posted 24 February 2012 - 08:42 PM

In re: price discrimination -- read this: http://www.kkrlaw.co...nation_2004.pdf.

For a lot more detail, see this: http://www.ftc.gov/s.../spring98.shtm.

And this: Law Firm Of Pepper Hamilton LLP | Robinson-Patman Act

#10 joel hoffman

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Posted 25 February 2012 - 12:54 AM

Ah,the Robinson-Patman Act. I had hand written that into my textbook back in 1983 under the discussion that I mentioend above. As the links that Vern provided above describe, this is something that a good lawyer would have to delve into and make sense of...

#11 jayandstacey

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Posted 20 March 2012 - 11:52 PM

So this is my first post here...

to the OP -
1. Although the links posted above talk about pricing going to resellers - you may not have been 'similar' enough to the contractor that got the deeper discount. Those pricing laws speak mainly to fairness; that you're afforded an opportunity to reach the same advantage...but did you achieve the advantage with Alpha Electronics as much as the other guy? ALL of the available advantage? There are a number of ways you may not have:
- The other company may have "worked" the deal prior to the solicitation and done things like invested in demos, marketed, etc. Alpha was named in the solicitation and SOMEONE made that happen - it may not have been Alpha themselves. Many companies have "deal registration" programs that help finders become keepers.
- The other company may have some other broader investment in Alpha, such as technical expertise (they're a 'platinum partner') or a different status (say, distributor vs regular reseller) that gives them an advantage most everytime.
- The other company may have bid Alpha services on the deal or done some other bundling that got them a better price for the products in question. You mentioned you bid the services from your own shop - maybe Alpha has offerings that you didn't avail yourself of, thus didn't get the best pricing.
- The other company may simply have come with a better offer, say...to allow Alpha to be included in meetings with the customer...or that they'd buy the project's worth of products on day 1 vs. on the Government's schedule.
- Lastly, if multiple of these factors are in play, they can 'stack' up against you and result in a significant advantage for the other guy.

2. Your evidence is hearsay. It may not be perfectly true.

3. The fact that Alpha was named in the solicitation but gave away discount is evidence that in fact they owed it in some fashion, as per above.

The key is that the laws (anti-trust and the others) ensure you have the chance at the same pricing, but don't guarantee you'll get it if you don't earn it. The trick is to go to Alpha and have a conversation about what programs / incentives / registrations and such are available and at what cost to you. Maybe next time you're the guy with the advantage, having earned it.

#12 jayandstacey

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Posted 20 March 2012 - 11:57 PM

OldHickory, while sellers may offer different prices or discounts, there may be limits or situations where it isn't considered legal. According to my 1980 and very likely outdated UCC Business Law textbook edition, there were laws that prohibit price discrimination between different buyers of commodities where the effect of such discrimination may be substantially to lessen competition or to restrain trade (e.g., the Sherman Anti-trust Act).
....
P.S. , I'm not a lawyer.

Yes, and that;s the balancing act a manufacturer must play - so things like 'deal registration' are an advantage but not a blow-out deal-killer advantage, and must be fairly and appropriately applied. And such pricing is given under NDA so as not to dissuade other bidders, and the manufacturer should never speak to things like "does someone have registration? Is this the best price anyone is getting?" etc. .

I'm not a lawyer either. But I do have the interwebs :)




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