“Fair and Reasonable” MAS contract level pricing is impacted by a host of factors. These include federal and commercial market conditions, government versus commercial contract terms and conditions, the Federal Acquisition Regulation (FAR), the General Services Acquisition Regulation (GSAR), and FAS policy, procedures, and training. Contracting officers must assess, analyze, and apply these factors when reviewing an offeror’s proposal and negotiating fair and reasonable pricing.
Currently, paradoxes in the MAS contract negotiation process and procedures are creating significant, contradictory, and unnecessary hurdles for contracting officers seeking to negotiate “fair and reasonable” pricing. In turn, contractors, including small business contractors, are seeing impacts regarding their access to the federal market and opportunities to compete for customer agency requirements. Here are just some of the paradoxes currently in play:
When “the collective buying power” of the federal government is not leverage.
FAS contracting officers are directed to “leverage the collective buying power of the federal government to obtain competitive, market-based pricing.” This policy directive is laudable and would make sense if the government was promising to buy all its requirements via the program, but, in reality, the goal is illusory. MAS contracts are not requirements contracts. The basic MAS IDIQ terms and conditions provide for a guaranteed minimum of $2, 500 over a potential 20-year contract period with the opportunity to compete for task and delivery orders in accordance with FAR 8.4. In an economy where opportunities exist that provide definitized business commitments exceeding what is offered under the Schedules, rational firms will choose to engage in those alternative business opportunities. Under the circumstances, MAS contracts terms and the commitment they represent simply do not create an environment where contracting officers can leverage the collective buying power of the federal government. Read the recent FAR & Beyond blog on this topic here.
When “fair and reasonable” is not “fair and reasonable.”
Until very recently, the MAS solicitation provided that “offerors proposing most favored customer pricing that is not highly competitive will not be determined fair and reasonable and will not be accepted.” Contracting officers were applying this “highly competitive” language with a broad brush to all types of offerors to determine whether proposed prices were fair and reasonable. GSA, to its credit, deleted this language from its solicitation, but the impact of this language on contract negotiation still is rippling through the system. To ensure that this needed policy change takes hold, the language should be deleted from all policy guidance, and contracting officer training should be updated to address the change in the context of determining a “fair and reasonable” price.
Previous FAR & Beyond blogs regarding this topic can be found here and here.
When an MAS contract is not an MAS contract.
Currently, contracting officers are treating each fair and reasonable pricing determination as independent from prior determinations for the same or similar items. The practical procedural impact of this approach has resulted in proposed modifications to MAS contracts triggering new fair and reasonable price determination requirements for the entire contract, including unrelated items pricing that already has been determined fair and reasonable. Under the circumstances, proposed modifications essentially trigger an entirely new contract negotiation for an existing MAS contract, which, given the commercial nature of MAS contracts, presents a market anachronism that mitigates the attractiveness of the program.