Overview
FAR 19.807 establishes the requirement and methodology for Contracting Officers to determine a fair market price for contracts awarded through the 8(a) Business Development Program. It ensures that the government pays a reasonable price by utilizing cost/price analysis and historical data comparisons.
Key Rules
- Mandatory Estimation: The Contracting Officer (CO) is legally required to estimate the fair market price for any work performed by an 8(a) contractor.
- Standard Methodology: For most acquisitions, the CO must use cost or price analysis and consider a variety of data points, including:
- Commercial prices for similar products or services.
- Internal government in-house cost estimates.
- Data provided by the SBA or the 8(a) contractor (including certified cost or pricing data where applicable).
- Information obtained from other government agencies.
- Repeat Purchases: When procuring the same items or services again, the CO must analyze recent award prices and adjust for variables such as:
- Comparability in quantities, terms, and performance timelines.
- Differences in specifications, transportation, or packaging.
- Economic changes in labor and materials (using price indices as a guide).
Practical Implications
- Pricing Justification: Since 8(a) contracts are often awarded on a sole-source basis, these rules serve as a critical safeguard to ensure the government does not pay a premium above market rates.
- Data Preparedness: 8(a) firms must be ready to provide comprehensive supporting documentation and market data to help the CO validate that their proposed price aligns with the government's fair market estimate.