Generally speaking, you want your pricing to come in relatively high (you can always come down later), while GSA wants your pricing to come in as low as the pricing of your "most favored customer."

But what if you don't want the government to lock in on most favored customer pricing? Are you stuck? Maybe, maybe not. The process of negotiating price -- of being forthright in disclosing your company's pricing, and yet getting the best deal you can -- is a subject worthy of a very long article, perhaps a book. We'll save it for another day.

This article focuses on post award issues -- the things to be concerned about AFTER your pricing has been established.

Basis of Award

We've touched on the "basis of award" in past articles. We'll say more here.

The term "basis of award" in GSA Schedule contracting is like "due process" in U.S. Constitutional law: there's a lot more there than appears at first glance. The Price Reductions clause, which is included in Schedule contracts, tells us why:

"Before award of a contract, the Contracting Officer and the Offeror will agree upon (1) the customer (or category of customers) which will be the basis of award, and (2) the Government's price or discount relationship to the identified customer (or category of customers). This relationship shall be maintained throughout the contract period. Any change in the Contractor's commercial pricing or discount arrangement applicable to the identified customer (or category of customers) which disturbs this relationship shall constitute a price reduction."

GSAM 552.238-75

The central command here is that, after award, the contractor is not supposed to lower its relevant pricing -- i.e., not "disturb" the basis of award -- without letting GSA know about it.

Post Award Audits

Alleged violation of the Price Reductions clause is the most common justification for a post schedule award audit. In such cases, the government generally will seek retroactive damages -- moneys the contractor WOULD HAVE paid to the government in the form of higher pricing. One example: in 2000, Gateway, Inc. agreed to pay the federal government $9 million to settle allegations it failed to give required price reductions from May 1994 through March 1997.

Further, if the government believes a contractor knowingly failed to comply with the Price Reductions clause or submitted false information during negotiations, it might seek damages under the False Claims Act. That act allows the government to recover up to three times the damages incurred and penalties of up to $10,000 per claim. Nasty, serious stuff.

How do you avoid such audits?

One thing you can do: if possible, negotiate a narrowly drafted Price Reductions clause. Generally, the lower the number of customers used as the basis of award, the better.

Another: coordinate your pricing. Make sure that all of your people responsible for pricing know about the Price Reduction clause and the company's basis of award. When there is a change in pricing, make sure the person responsible for the GSA contract knows about it, so that he or she can let GSA know about it.