Delving into Public Sector - MythBusters #3: 4 Myths Surrounding Pricing to the Federal Government
As we continue busting through some of the many myths surrounding selling to Public Sector, especially the Federal Government, in this edition we are going to tackle four myths surrounding pricing. The rules around pricing are probably one of the most misunderstood aspects of selling to the Federal government. When selling commercially or to the government pricing can be the costliest to a contract holder if you do not understand your contract terms.
Myth #1: The Government always has to have the lowest price.
Myth #2: GSA always has to receive the deepest discount a company has to get a Contract.
Myth #3: Companies can never extend a deeper discount to a commercial or Government Client if they have a GSA Contract.
Myths 1, 2 and 3 are very similar so we should address them together. There is really so much in these three myths so I will try to address a couple of different aspects around them. They are all false statements, but they definitely have some compliance understanding required to securely navigate them as a contract holder.
To help carve away at these myths, we need to understand a few simple basics.
Basis of Award: As a GSA contract holder, the Government should be your best customer and your contract that you negotiated is based on this premise. However, you also negotiated your contract based on a basis of award. Your basis of award is who your best customer, also known as Most Favored Customer (MFC), was prior to GSA and is what your negotiations are based on. Therefore, within your negotiated tiers and the Maximum Order Limit (MOL), you should not give anyone within your basis of award category better discounting than your negotiated GSA allowance of discount. Outside of your basis of award, you can provide better discounting as needed to win the award, on a project-by-project basis. But to be safe, document the commercial project specific items such as who were you competing against, quantity, is the product being customized, who will be making the purchase and issue the PO, etc. Additionally, this only applies to products that are on your GSA contract so any products not on your contract are not limited by your GSA contract.
MOL: I mentioned this above, so I want to clarify. The MOL is negotiated as part of your GSA contract. Once you surpass that threshold above your negotiated MOL there are no limits to how you can price your products to any commercial customer.
Competitive Landscape: GSA understands the nature of competition and if you are in a competitive situation or project situation, they do allow for you to provide commercial pricing that is deeper than GSA. I would recommend you work with your contract administrator and, in some cases, your Contracting Officer (CO) to make sure you are documenting this correctly to be compliant with your contract.
That covers the commercial side of the pricing myths, but what about selling to Government end users? GSA has no problem at all with you offering additional discounting/pricing to government agencies. If you need to discount beyond your standard GSA contract to win a BPA, IDIQ or project with a Federal end user/agency you are free to do so. I would caution that this could trigger a GSA request for similar pricing in the future.
Myth #4: I can’t run an end-of-the buying season promotional pricing to the Government
You are closing in on year end and you are looking for a way to get some sales, but you don’t think you can adjust your GSA discount? You are wrong. You most definitely can run an end of the buying season- or even beginning or middle- promotions. In order to do this, you would determine which products you would like to offer this promotion on. If the products are on GSA advantage, you will need to run the promo on there and it is as simple as putting in sale or temporary pricing in the SIP file. For products not on GSA Advantage you will want to provide the product list along with the specifics of the promotion to your CO. They will approve and then you are free to market this promo to your GSA end users, prospects, dealers etc.
Thanks to everyone who sent in these pricing myths to be discussed. I cannot emphasize enough how important it is to understand your contract, basis of award and your compliance terms in regard to your contract to ensure you are making the best decisions for your company when it comes to pricing. There have been some hefty fines to furniture manufacturers who did not understand, or perhaps did understand but thought they could get away with something. You do not want your company to be the next headline!
ABOUT MICHELLE WARREN
Founder, President Catalyst Consulting Group
Michelle Warren is President of Catalyst Consulting Group, a firm specializing in providing strategic solutions to the commercial furniture industry to enhance their sales, positioning, and distribution.
With 25 years of industry experience on the dealer and manufacturer side of the industry, Michelle has been recognized as an innovator in selling to the Federal Government, State/Local Government, Higher Education and Cooperative Purchasing. Her expertise includes: sales strategies, strategic planning, 3-5 year road mapping, targeted marketing plans, distribution development, hiring reps, and training for reps and/or dealers.
Michelle is known as a “serial networker” in the furniture industry and enjoys meeting people and making connections happen. If you’re interested in connecting - reach out at:
Michelle@strategic-catalyst.com, connect on LinkedIn or visit
www.strategic-catalyst.com to learn more about her work.
As seen in Delve | September 2022 V.30