Pricing policy

Overview

FAR 15.402 establishes the fundamental responsibility of Contracting Officers (COs) to ensure the government pays fair and reasonable prices when purchasing from responsible sources. It provides a specific hierarchy for obtaining pricing data, emphasizing the use of the least burdensome information necessary to make a determination.

Key Rules

• Data Requirement Hierarchy: COs must follow a preferred order when seeking data to determine price reasonableness:
  1. No additional data: Required if the price is already based on adequate price competition.
  2. Data other than certified cost or pricing data: Includes market prices, catalog prices, and previous sales history (relying first on government-available data, then third-party data, and finally data from the offeror).
  3. Cost data: Only to the extent necessary to determine a fair price.
• Prohibition on Excessive Data: COs must obtain enough data to support their determination but are expressly forbidden from requesting "more data than is necessary," as this increases lead times and costs for both parties.
• Mandatory Analysis: COs must use price analysis, cost analysis, or cost realism analysis to establish reasonableness.
• Independent Pricing: Each contract must be priced separately. COs are prohibited from using price reductions on other contracts as evaluation factors or considering a contractor's profits or losses on other projects.
• Contingency Double-Dipping: Contracts cannot include costs for specific contingencies if the contract already provides for a price adjustment based on the occurrence of those same contingencies.

Practical Implications

• Contractors can reduce their administrative burden and proposal lead times by providing robust market data and commercial sales history, which may prevent the CO from escalating to a request for more intrusive cost data.
• The regulation protects the competitive process by ensuring that a contractor’s past performance or financial standing on unrelated projects does not improperly influence the pricing and award of a new, independent contract.