Price Reductions

Under the GSA Schedules Program, GSA awards fixed prices for supplies, while services are priced at either hourly rates or at fixed prices for specific tasks. The GSA Schedule Contracting Officer (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).
FAR 8.405-4 requires ordering activities to seek a price reduction for all orders or BPAs that exceed the SAT. This requirement applies to all Schedule orders or BPAs over the SAT, regardless of the level of competition, discounts offered at the Schedule level, type of product or service being acquired, or any other factors surrounding the procurement. Contractors will often "sharpen their pencils" to obtain a large Schedule contract order.

Yes, ordering activities are encouraged to seek additional discounts and/or concessions for all orders and BPAs placed against Schedule contracts. Vendors may be motivated to offer discounts based on factors other than order value, including competitive forces, technological changes, labor conditions, industry sales goals, and inventory reductions. Keep in mind that Schedule prices represent not-to-exceed, ceiling prices, and vendors establish Schedule prices with all order sizes, types, complexities, geographical regions, etc. in mind, anticipating the opportunity to discount prices at the order level. By seeking discounts on all orders, the government can take advantage of flexible and dynamic pricing in the commercial marketplace.

Specific reasons to seek price reductions include instances where the ordering activity has determined that a supply or service is available elsewhere at a lower price, or when BPAs to fill recurring requirements. The potential volume of orders under BPAs offers the opportunity to secure price reductions, regardless of the size of individual orders.

Whether the FAR requires a price reduction request or the ordering activity seeks one voluntarily, ordering activities may seek discounts at any time prior to award. This applies when placing an order directly with a vendor or when issuing a Request for Quotes (RFQ). When placing an order directly with a vendor, ordering activities should request a discount, either orally or in writing, prior to order placement. For example, after reviewing multiple Schedule price lists, an ordering activity could email several vendors to request a price discount and place the order with the vendor that offers best value. Another example would be a purchase card holder calling a single vendor to request a price discount on a micropurchase prior to placing the order.

When issuing a written RFQ, it is a best practice to request a price discount in the initial RFQ and after quotes have been received and evaluated. The RFQ should always request that vendors offer their best pricing with their initial quotes, inclusive of all discounts. For example, the RFQ price submission instructions RFQ could state, “GSA is seeking price reductions from awarded Schedule pricing in accordance with FAR 8.405-4. Quotes should include the offeror’s best pricing, inclusive of all discounts, as there may not be another opportunity to offer further discounts.”

After the initial evaluation but prior to award, the CO can request additional discounts from one or more vendors, as appropriate. Vendors may be willing to offer additional discounts or concessions after submission of their initial quote in order to secure award. Even when only one quote is submitted, ordering activities should request an additional discount prior to placing the order.

In addition, FAR 8.405-3(e) requires ordering activity COs to review BPAs and determine in writing, at least once a year, whether estimated quantities/amounts have been exceeded and additional price reductions can be obtained. Even when estimated quantities/amounts have not been exceeded, it is a best practice to always seek additional price reductions during the annual BPA review.

For all acquisitions, ordering activities should conduct market research to get a sense of what prices they should expect to pay, including what, if any, discounts may be appropriate. Understanding the marketplace by examining prices paid data, current commercial pricing practices, and other industry trends can help ordering activities identify when additional discounts may be warranted. The Acquisition Gateway is one potential source of this information.

Maximizing competition is another way the government can leverage its buying power and encourage price discounts. Contracting activities are encouraged to engage industry early in the acquisition planning process to allow vendors adequate time to prepare for upcoming competitions. Contracting activities are also encouraged to post RFQs to eBuy, even when not required by the FAR, to increase RFQ visibility and the pool of interested vendors. Vendors may be more likely to offer discounts in a more competitive environment.

Yes, even though ordering activities must still seek discounts when required, they may place orders or establish BPAs when no price discounts are offered in response to a discount request. The GSA Schedule CO has already determined contract prices fair and reasonable, and contractors are not obligated to discount their Schedule prices.
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