GSA Schedules are the most widely used contract vehicle for selling to the government. Understanding the ins and outs of the GSA pricing policy can be tricky, but once you know how to set your business apart from the rest, you’ll be managing bids like a pro.
The GSA pricing policy requires businesses to offer the best price, often meaning the lowest price, possible for federal agencies to receive a deal. A problem occurs, however, when the government expects vendors to provide cheap prices even if it negatively affects their business. The government refers to this as “volume discount pricing” because many federal agencies will make large orders from a vendor rather than just one product or service.
What the GSA wants from vendors in terms of the GSA pricing policy often correlates with the business losing money in order to offer such a steep discount. A kind of paradox occurs because prices need to be low in order for federal agencies to accept a bid, but your prices have to be at a point where your business is still prospering. However it’s important to note that although the GSA requires the lowest prices, these prices aren’t set by the lowest prices on the market, they’re determined by the structure of your business’s commercial prices.
This point is where many businesses ultimately fail with their GSA Schedule. They may have the lowest price, but the significant discount is causing them to lose money, and isn’t worth the business they’re receiving. Or on the other hand, the business might feel that offering prices so low is out of the question, so they set pricing at a higher rate and then they are unable to receive business because federal agencies can find a better price elsewhere. In both of these situations, the vendor finds that their GSA Schedule isn’t as prosperous as they imagined it would be and they end up wasting all the hard work and energy that they put into obtaining their contract.
However, the GSA pricing policy does allow for federal agencies to have a good price to make significant orders, so if your price is right, you can find that your GSA Schedule brings you the success and monetary reward that you hoped for.
The trick is to have a solid pricing strategy before you actually get started looking for bids within the system. The right strategy will provide the best of both worlds: federal agencies receive a discount on your product or service in order to encourage them to buy in bulk, and your business receives a significant profit when the large orders start coming in.
GSA will determine whether your pricing is fair and reasonable as part of accepting your contract, and rather than just choosing a price and hoping for the best, here are some tips to help you successfully navigate the GSA pricing policy.
Find Success With the GSA Pricing Policy
In order to develop the best pricing strategy, there are a few steps you should take to ensure you’re on the right path to providing the best price. You want to be able to achieve a happy medium with your price being competitive, prosperous for your business, and still within the range that a contracting officer will accept.
The first step you can take is to evaluate the cost structure of your business by looking at the indirect and direct costs to better define your pricing policy.
For indirect costs:
- establish cost pools and bases
- calculate indirect interest rates
For direct costs:
- look at costs incurred by labor, materials, and other direct costs
Once you’re done examining these and add a profit factor, you can determine what you want to set your business’s prices at. At this point you can take a look at the prices of competitors in order to get an idea of what the prices are like within your schedule. This valuable information is available online, and will help you be able to market your company competitively.
The prices for your GSA Schedule are meant to be based on your commercial sales, so your current commercial market sales are used to determine the discounts you’ll offer. Once you determine who your Most Favored Customers (MFCs) are you can set your discount for them, and then determine another discount for GSA. MFCs are customers who can receive a better deal based on the pricing available.
The GSA pricing policy is designed to have GSA be the best way for federal agencies to find businesses who can provide the products or services they need to keep their offices running smoothly. Although it can be confusing, if you’re able to effectively and competitively price your business, you’ll find success with your GSA Schedule.