9.0 Introduction

A fair and reasonable price can be reached by factoring industry and market pricing with the expected value and quality of the IT products, solutions and/or services to be received. Fair and reasonable does not necessarily mean the lowest price offer. All information technology (IT) procurement professionals have a fiduciary responsibility to analyze the price or cost the Commonwealth pays for its IT goods and services and to pay no more than a fair and reasonable price for such goods and services. These are things to keep in mind when analyzing the pricing of IT goods and services:

  • Most commercial items are considered to be fairly priced. Buyers and suppliers have many product and supplier choices and there is a balance of market leverage. If there is adequate competition among suppliers, then buyers can generally rely on market-based prices as being fair and reasonable. However, if there is only one supplier, and many buyers, then the marketplace does not ensure that a price is fair and reasonable; it is simply the price the market will bear.
  • Commonwealth procurement professionals are held to a higher standard than just accepting "what the market will bear." They must determine and verify that the price they have agreed to pay is a fair and reasonable price. A price that has been established in a non-competitive commercial marketplace is not necessarily fair and reasonable. There is no harm in asking the supplier to provide evidence of prices charged to other similar customers purchasing like IT products and services.
  • IT procurement professionals may be reluctant to challenge the advertised commercial price of an IT good or service. Do not make the mistake of considering commercial or advertised pricing non-negotiable. Securing an optimum pricing agreement may require challenging the market for the best terms. Commerciality can impact the original contract as well as modifications. If a modification is so significant as to alter the commerciality of an item, then cost or pricing data may be needed.
  • Services (e.g., packaging, shipping, and availability) for commercial items may exceed the Commonwealth's need. It may be possible to negotiate a price reduction by reducing or eliminating some of these services, thus reducing the supplier's cost and the price charged to the Commonwealth, while still ensuring that the item meets the Commonwealth's need.
  • Alternatives may not have been sufficiently reviewed. Areas overlooked may include cost benefit analysis of lease versus buy or analysis of spare or replacement parts pricing.
  • Catalog pricing may be restrictive based on the quantity being purchased or the Commonwealth's requirements may exceed normal commercial demand. If so, the buyer should attempt to negotiate a lower price for quantities greater than listed in the catalog to maximize possible discounts or rework the requirements to reflect market available IT goods and services.