Companies that discount based on market conditions-i.e. indiscriminate discounting-face a difficult path when negotiating with GSA. The GSA pricing policies are based on the principle of set price and discounting practices. The exact opposite philosophy drives market conditions discounting.

For instance, say Company AGW manufactures plywood. Some years are good, others, not so much, and plywood prices go up and down, but within a reasonable range. One year the company execs bank on hurricane forecasts predicting a horrendous hurricane season and the company manufactures massive quantities of plywood. At the end of a markedly mild hurricane season, the company is disastrously over-stocked and sells the plywood at an eyelash above cost. GSA will begin negotiations asking for a discount equal to or greater than Company AGW's largest discount.

One way to solve the problem is to tell GSA that your company is establishing set discounting policies and then negotiate a reasonable GSA price based on an agreement with GSA not to exceed a set discount. However, you will actually have to discontinue indiscriminate discounting and not exceed the agreed upon discount or you will trigger the dreaded Price Reduction Clause.

Many companies either can't or won't establish set discounting policies. We often have people leave our proposal workshops saying that establishing set discounting practices in their businesses is long overdue and would probably improve the bottom line in the long run. A favorite refrain is "Maybe this will finally get the owners to stop playing the pricing game by the seat of their pants."

Keep in mind: If you say you are going to stop sinning-being an indiscriminate market discounter-in your proposal, then you better actually adhere to the stated discounting policy or the GSA auditors will surely dole out the penance.

Other possible solutions:

• Accept a discount equal to or greater than your Most Favored Customer. (And in the case of Company AGW, go bankrupt.)
• Ask GSA to disregard the most extreme discounts using a terms and conditions argument and settle on a GSA discount based on ranges or averages of your market discounts. This is a very difficult argument to make under current policies at GSA because indiscriminate discounts are usually not based on terms and conditions.