Pricing can be the biggest stumbling block for businesses applying for GSA schedule contracts. The notion that the government expects the absolute lowest price in the world, plus the fear of triggering the Price Reduction Clause, lead some to conclude that it’s just not worth the hassle and risk for such low margins.
It is tempting to automatically set your price as low as possible, especially when selling products. Here are three pieces of information that may cause you to reconsider how to structure your GSA Schedule pricing proposal.
Similar Terms, Quantities, and Conditions
The misunderstanding out there is that you need to give GSA the lowest price you’ve given anyone. The truth is that you need to give GSA the lowest price you’ve given to anyone with similar terms, quantities, and conditions.
This is a big difference. Let’s imagine that you give your distributer a 40 percent discount, but only on purchases over $250,000; this distributer takes the risk holding high volumes of your product, promotes and sells your product, represents your brand, and has their cousin Jeff drive down to the warehouse monthly to save on shipping. The government may want that 40 percent discount, but because the terms, conditions, and quantities are not similar, should they actually get it?
If you can establish that the federal government is more similar to a customer that gets a lower discount, you may be able to establish a higher GSA ceiling price.
GSA is going to negotiate during your proposal process
Before your Final Proposal Revisions are signed, your GSA Contracting Officer is going to negotiate. A CO may take the stance that your items are too expensive, no matter how slim the margins. Your company can do better.
COs are required to push that discount rate as high as possible so they can get the best deal for the government, and ergo the taxpayer. S/he will most likely push back on your proffered discount rates. If these rates are already at your limit, you may not be able to successfully negotiate during the proposal process.
Purchasing agencies are required to ask for additional discounts
Your GSA price is a ceiling price, meaning you can’t charge the government a higher rate. But you can always go lower.
“The GSA Schedule CO determines the prices of supplies and fixed-price services, and rates for services offered at hourly rates, to be fair and reasonable prior to contract award. However, ordering activities are always encouraged – and, in some cases, required – to seek additional discounts (i.e., price reductions) prior to award of Schedule orders and Blanket Purchase Agreements (BPAs).”
In order to be competitive, it may behoove you to keep prices high. You may then have room to discount individual orders from agencies.