Company Big (large business) is a sole source supplier of unique items of supply (not commercial items). Company Big refuses to get involved with the Government in discussions on price and other terms for requirements under the cost or pricing data threshold. So Company Big enters into an agreement with Company Small, a small business, who acts as a dealer/distributor for Company Big. All RFQs that are sent to Company Big are forwarded to Company Small, who then provides a quote to the Government. When the contracting officer starts to question Company Small on pricing, Company Big enlists a few more small businesses to act as dealers/distributors, thus providing 'competition' for the C.O. Everybody's happy, right? Company Big still sells its product, without any prime responsibility for the contract and the CO has competitive pricing for his requirement while still obtaining the unique item required.

Does this scenario meet the definition of competition? Can the CO make Company Big deal directly with him? Appreciate your input.

By Anon on Monday, May 20, 2002 - 02:51 pm:

See FAR 6.302-1 (c). It doesn't appear to meet the test for competition, basically it sounds like you're buying company Big's brand X. Now if the dealers obtained the product rights and were able to market the item free from Big's influence, then a case for competition could be made since the offers would be submitted independently of each other, see FAR Part 15 for the definition of adequate price competition.

Can a PCO make a company deal with the gummint? I'd like to see one try, in a free market economy isn't company Big free to participate and just as free to opt out?

By curious on Thursday, May 23, 2002 - 01:27 pm:

Anon:

Thanks for your reply. I should have been more specific in my post. I agree that the scenario painted does not meet the criteria for competition under CICA. I was looking for opinions on whether it meets the criteria for price competition since it could be argued that the dealers are competing independently.

Regarding your last comment, what is the 'gummint' gonna do if it has a legitimate, critical requirement for sole source items of supply and the sole source supplier won't play (other than games that serve to increase the overall cost of the item)?

Thanks again.

By Smokey on Thursday, May 23, 2002 - 02:38 pm:

Why in the world would we put ourselves in a sole-source position with this type of company? Somebody sure dropped the ball on this one.

By Anonymous on Thursday, May 23, 2002 - 03:25 pm:

I think your answer lies elsewhere...in my opinion this is a true "sole source" situation. However the point of competitive pricing is to provide a basis for determining the price fair and reasonable. Surely the item being acquired is not so unique that some comparisons cannot be made to make that determination.

By joel hoffman on Thursday, May 23, 2002 - 03:39 pm:

Curious, I'm pretty sure that your scenario doesn't meet the test for adequate competition.

In that case, the KO is supposed to raise the issue of refusal to provide cost or pricing data, up the chain. Maybe they have some secret instructions on how to handle this, but I'll bet that if they can't cajole or sweet talk the Contractor into providing the info, they prepare an MFR documenting their attempts and send the action back to the field.

Is the sole source supplier also the manufacturer? Do they really want the business? If they do, maybe the Government's bigbigs can talk their bigwigs into providing information... happy sails! joel

By AnonymousMe on Thursday, May 23, 2002 - 04:00 pm:

For discussion's sake ...
What if the sole source supplier is also the manufacturer, and they have enough of a commercial offering that they don't need the Government's business? I've seen that in the case of engines and other parts with commercial application. If the Government has a legitimate requirement it seems to me they'll have to pay, closed kimono.

By joel hoffman on Thursday, May 23, 2002 - 05:31 pm:

Ah, that is "a horse of a different color!" It might be considered a commercial item.

Can you find out what the other customers paid? That's a first step in determining reasonableness. "Reasonable" means different things to different people. If everyone pays an inflated price, is it "reasonable?"

So, what happens if they insist on charging the Government more than the going, commercial price? Is it then no longer be considered "commercial item"? happy sails! joel

By Anon2U on Thursday, May 23, 2002 - 07:33 pm:

There are two separate issues here:

1. Complying with CICA and making the competition advocate a happy camper and;

2. Making a fair and reasonable determination. This can be done in a multitude of ways.

At my agency it is considered competition if the requirement is sent to multiple dealers. Some manufacturers compete against their dealers and some do not. Some will tell you that they have a MSRP price for your third bid. (but it will always be higher than their dealers discounted prices).

By curious on Friday, May 24, 2002 - 09:27 am:

To All:

These aren't commercial items. The sole source supplier is the actual manufacturer and the 'dealers' only are involved in sales to us.

Under the current situation, the sole source still gets the business, at the same time, the company limits our access to them through the use of 'dealers'. Not surprisingly, their prices keep escalating.

Smokey: The decision to use this supplier happened a long, long time ago. They weren't always as difficult to deal with.

I personally don't believe that one can make a good argument for price reasonableness based on the 'competitive' dealer prices, but I've been told that I'm wrong. Just looking for some other opinions.

Thanks.

By skeptical on Friday, May 24, 2002 - 11:31 am:

The idea of the government buying through unique and government only "dealers" appears to be a sham that should be discouraged whatever the legal and regulatory answer may be. It does not quite pass the smell and Washington Post test in my opinion.

No, except in extraordinary national emergencies, we cannot require a company to fill a government need (it was done in WW I and II to a degree). The government can certainly quit being a compliant accessory. I would say the long ago decision to use this "unique" item and its supplier needs a thorough review.

Just how unique is this item? What modification in equipment or practice would open the door to other items replacing this one? Is the item so unique and so protected by trade secrets and patents another with competitive pricing cannot replace it? It sounds to me that your agency needs to do something more than just lie down and participate in this ever increasingly expensive sham. The process might be quite rewarding in a number of ways and expose other weaknesses in the decision of long ago.

By Kennedy How on Tuesday, May 28, 2002 - 12:30 pm:

I've gone through this before. The BIG manufacturer has basically told us that they don't need our business, and if you don't want to play by my rules, then you can go somewhere else. But, in reality, there is nowhere else.

I know we go around and around on this issue internally; depending on the item, we sometimes can find a like item somewhere else, and do a comparison. It sometimes takes a clever price analyst to come up with something that can justify the price.

It is certainly difficult for a company who makes only Govt-unique items to try and resist cost and pricing data. It's another thing if the Govt's business is less that one-half of one percent of their overall business, and that source of income is so negligible that the contractor is willing to put up with that sort of thing.

Kennedy