Sign In
  • Question

    How do I justify price reasonableness?


    I've cut/paste the relevant passages from the FAR that help to answer your question.  The Contracting Officer (CO) has a great deal of discretion to determine fair and reasonable according to FAR 13.003 as long as the CO maximizes competition to the extent reasonably possible.  The CO should weigh the administrative cost of verifying price reasonableness per 13.203(a)(3) which provides the specific situations when price reasonableness needs to be verified.  You've said that you already compared the proposed price to the price obtained for the most recent previous purchase of the service.  Has your office made other previous purchases of the same/similar service over the last few years you could review and look to see if there's been a trend of the price increasing year-to-year.  If you're comparing prices to prices received for previous purchases don't forget to index the prices in order to take into account any difference due to market and economic conditions (e.g. inflation/deflation).  If your office has not made any other previous purchases, FAR 13.106-3 provides several other options for making price comparisons.  The best being to obtain some other quotations from other providers to compare to the quote you received.  If you able to only obtain one quote, then the next best option would be to compare to prices found reasonable for previous purchases.  Also, another good idea is to do some market research to try to find some other sources for obtaining pricing for similar/same services such as catalog or maybe even advertised prices.  Might want to consider researching GSA Advantage and Google is another helpful research tool.  Finally, FAR 13.106-3 has some other good suggestions for finding pricing you can use to compare to the proposed price.

    13.106-3 Award and documentation.

          (a) Basis for award. Before making award, the contracting officer must determine that the proposed price is fair and reasonable.

               (1) Whenever possible, base price reasonableness on competitive quotations or offers.

               (2) If only one response is received, include a statement of price reasonableness in the contract file. The contracting officer may base the statement on-

                    (i) Market research;

                    (ii) Comparison of the proposed price with prices found reasonable on previous purchases;

                    (iii) Current price lists, catalogs, or advertisements. However, inclusion of a price in a price list, catalog, or advertisement does not, in and of itself, establish fairness and reasonableness of the price;

                    (iv) A comparison with similar items in a related industry;

                    (v) The contracting officer’s personal knowledge of the item being purchased;

                    (vi) Comparison to an independent Government estimate; or

                    (vii) Any other reasonable basis.

               (3) Occasionally an item can be obtained only from a supplier that quotes a minimum order price or quantity that either unreasonably exceeds stated quantity requirements or results in an unreasonable price for the quantity required. In these instances, the contracting officer should inform the requiring activity of all facts regarding the quotation or offer and ask it to confirm or alter its requirement. The file shall be documented to support the final action taken.

    13.203 Purchase guidelines.

          (a) Solicitation, evaluation of quotations, and award. (1) To the extent practicable, micro-purchases shall be distributed equitably among qualified suppliers.

               (2) Micro-purchases may be awarded without soliciting competitive quotations if the contracting officer or individual appointed in accordance with 1.603-3(b) considers the price to be reasonable.

               (3) The administrative cost of verifying the reasonableness of the price for purchases may more than offset potential savings from detecting instances of overpricing. Therefore, action to verify price reasonableness need only be taken if-

                    (i) The contracting officer or individual appointed in accordance with 1.603-3(b) suspects or has information to indicate that the price may not be reasonable (e.g., comparison to the previous price paid or personal knowledge of the supply or service); or

                    (ii) Purchasing a supply or service for which no comparable pricing information is readily available (e.g.,a supply or service that is not the same as, or is not similar to, other supplies or services that have recently been purchased on a competitive basis).

          (b) Documentation. If competitive quotations were solicited and award was made to other than the low quoter, documentation to support the purchase may be limited to identification of the solicited concerns and an explanation for the award decision.

    Open full Question Details
Chat with DAU Assistant
Bot Image