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Discussions About Price
By Anonymous on Tuesday, June 19, 2001 - 06:28 am:

I work in an office where we buy commodity type items in large quantities and we are having a debate about source selection discussions. One person has said that it's okay to tell one offeror that another offeror has proposed a price that's "approximately five percent" lower and to ask whether the offeror can do better than that. Others are saying that its "wrong" to do that, "unfair," "bad practice," "not the proper use of discussions," etc. One KO says that everybody had a chance to propose a competitive price and we should not use discussions just to give some offerors a chance to propose a better price. She says we should only use discussions to disclose deficiencies and weaknesses and that unless a price is unreasonable we shouldn't try to get a better price.

We already know that the FAR no longer prohibits auctions and that you can disclose an offeror's price if you get its permission and that some agencies are conducting "reverse auctions." We also know that you must treat all offerors fairly but not necessarily the same. What we are trying to decide is if it's "unfair" or "bad practice" to conduct discussions by asking an offeror to beat another's price.

Any thoughts about this?


By MikeW on Tuesday, June 19, 2001 - 08:27 am:

I disagree with the KO who said that we shouldn't try to get a better price - I think price negotiations are essential to proper negotiations; however, I don't think the way you are trying to accomplish it is allowable, UNLESS, you get the other offerors' permission. By saying a competitor's price is "approximately 5% lower" without getting the permission of that competitor, you are violating the spirit, and probably the letter of the law. You are doing this in two ways. FAR 15.306 states, in part, that Government personnel involved in the acquisition shall not engage in conduct that favors one offeror over another, or reveals an offeror's price without that offeror's permission.

If you told ALL offerors the results of your price analysis, that would be acceptable according to the FAR. If anyone has any case law on this issue, please share.

Mike W.


By Anon2U on Thursday, June 21, 2001 - 07:28 pm:

In RFPs with trade offs and discussions are needed - I have always thought that if all else is equal between two competitors except the price, then the one that is losing must be made aware that his "weakness" is the price. Then he has a chance to improve on the final proposal revision. But I have been known to not think the same as those with more experience.


By Eric Ottinger on Friday, June 22, 2001 - 11:42 am:

Anon2U,

Yes, but.

You shouldn't encourage an offeror to propose less than a realistic price.

Also, if your higher priced offeror lowers his price for the revised proposal and the other offeror stands pat, the other offeror is going to think that the only reason that he lost is because you discussed price with one offeror and not the other.

In the scenario that you describe, I would probably tell both offerors that they are in a really tight competition and they have to do the best that they can on price.

Eric


By Anon2U on Friday, June 22, 2001 - 07:59 pm:

Thats what we did, my example was flawed.


By Eric Ottinger on Thursday, July 05, 2001 - 04:57 pm:

See: SOS Interpreting, Ltd.,No. B-287477.2, May 16, 2001

"1. Agency was not required to conduct discussions with protester aimed at lowering its proposed price below the awardee’s, even though award was ultimately based on lowest price, where agency determined that protester’s price was reasonable and comparable to other offerors’ prices."


By Anonymous on Thursday, July 05, 2001 - 10:11 pm:

Okay, so the GAO says you don't have to discuss price. But I don't care what the GAO says in that regard. My question was whether it's unfair or bad practice to negotiate for a lower price.


By formerfed on Friday, July 06, 2001 - 07:14 am:

Eric's comment above about not encouraging less than a realistic price is good advice. Sure, you can always try and negotiate a lower price, and use a variety of means to get there including some that aren't so proper. However, it's also important to remember our jobs involve more than getting the lowest possible price on a given deal. The long term existence of a base of good suppliers is vital to our country's defense, research, health, and other needs. Companies flourish by making fair profits on the work they do, and that's where we as professionals come into the act. We should decide what a fair price is for each offeror individually and deal with each uniquely. In some cases, a higher price may not be out of line based on what is offered. Just stick with Eric's words.

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