Raising Your GSA Contract Pricing

Raising Your GSA Contract Pricing

Ways to Increase GSA Contract Pricing

Ok, your GSA Schedule was finally secured and you are happily doing business with the government. But the market could fluctuate, it is dynamic. It constantly changes, and at some point, continuing to fulfill your obligations to the government may turn out to be less profitable than it had been before.

So the question becomes: can you raise your GSA contract pricing before your currently signed contract expires? And if yes, how to do this? This article answers the question.

Does GSA allow contract price increase?

First things first – the answer is yes.Actually, here is a typical reason for contract modification, and it is called Economical Price Adjustment (EPA). There are two options to perform an EPA in your GSA Schedule contract:

  1. Commercially based escalations
  2. Annual escalations

Regardless of the option, all economic price adjustments are made in accordance with clause I-FSS-969 or the clause 552.216-70. Which one is yours? This is specified in your GSA contracting documents.

Commercial price escalations

Under commercial price escalation, you may raise your GSA prices as long as your commercial prices have also increased. This requires modification of your current GSA contract. Also, you must provide either a commercial price list or a catalog, that indicates how your commercial prices/rates have increased, as of a specific date. If you are a reseller, and want to increase your GSA prices because your suppliers did so, you must additionally provide a confirmation letter, along with your supplier’s prices list.

Note that a procurement officer may still decide to perform additional market research before the contract modification you suggest is approved. This is because GSA always wants fair and competitive pricing, so raising you rates just because you’re looking to jack up profit margins won’t do.

Annual price escalations

Alternatively, you can negotiate a certain increase percentage on your GSA prices every year. The average amount is about 2-2.5% annually. Note that you are still required to provide the best deals to GSA, so increasing your GSA rates will automatically require you to annually increase your commercial rates as well, in order to keep that obligation.

To what extent can you raise GSA contract pricing?

Surely enough, as one might suppose, you cannot raise prices any time you want. The government allows you to do this up to 3 times per year, but no more than a total of 4% increase annually. Previously, the amount was 10% per year, but then the maximum cap was reduced to 4%. This may not seem substantial, but nonetheless gives you some chances to keep a competitive edge with the market.

How to raise GSA pricing if you sell products

The contractor can change product pricing (or, more precisely – send a request for a price change) under the following conditions:

  1. Price list that was used as a base for contract pricing was changed (i.e. prices have gone up)
  2. Contractor must hold a contract for at least 12 months before their first request to modify GSA pricing.
  3. Proposal to price change must be submitted prior to the last 60 days of contract expiration date, and no sooner than 30 days after such last submission.

If you sell products to GSA and want some free GSA proposal templates, please contact Price Reporter. We would be glad to help you.

How to raise GSA pricing if you sell services

For service vendors, the procedure is nearly the same with the exception that their contracts are typically governed by the clause I-FSS-696. The clause states that all economic price adjustments are negotiated prior to contract signing. The contractor should select the proposed EPA mechanism: either EPA based on fixed escalation rates, or EPA based on the predefined market indicator, such as a public survey or public index.

The conditions are:

  1. You can submit no more than 3 GSA price increases during each year of the contract period. After the third one, all subsequent requests will not be considered.
  2. Proposal to price change must be submitted prior to the last 60 days of contract expiration date, and no sooner than 30 days after such last submission.
  3. You must provide some proof that clearly displays GSA contractor’s net costs increase on labour, as of some specific date.

If you don’t know where to start, please don’t hesitate to contact Price Reporter for a readily available GSA proposal template that you can submit, to request price increases.

Conclusion

With all that was said above, you should keep in mind that the government reserves the right to decline your request, or negotiate lower pricing than you ask for. That is totally normal. Also note that GSA schedule rates must remain fair and reasonable, as the government is your Most Favored Customer, and it must receive correspondingrates corresponding to that standart, all the time. Hence, if you fail to substantiate your proposed price increase, your request will be declined. And since you can only submit no more than three requests annually, every mistake means you are one step closer to being unable to negotiate better prices for your company. That is why you may want to delegate price negotiations (including composing and submitting EPA request documents) to professionals such as Price Reporter. We have already been helping companies that are doing business with the government for 14 years. Do not hesitate to contact us.

Comments
  • Thus, the first year of cooperation with the state can be unprofitable for my firm if all competitors in the market increase prices. And I, apparently, can’t do it? But then what is the point of this cooperation?

  • So, no matter how the market price fluctuates – will I really not be able to change the price specified in the contract during the first year? What if the market price for my service is falling and the government can no longer get its best price? Will the contract be terminated because of this restriction? I read on your blog that the government can terminate the contract unilaterally. Or is the ban on price changes during the first year only valid for price increases, not for price reductions?

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