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Chapter 9 - Determining Fair and Reasonable Pricing

9.5 Price reasonableness determination documentation requirements

A written price reasonableness determination is required to determine if offered prices are fair and reasonable when:

  • Competition is restricted or lacking, i.e., sole source purchases, emergency procurements, single response purchases, contract changes and renewals,
  • The prices offered do not appear on the face of the proposal or bid to be fair and reasonable,
  • The decision is made to award to other than the lowest bidder or highest ranking offeror (appropriate award clause must have been included in the solicitation).

The written determination of fair and reasonable price requires that the price is acceptable to both the agency and the supplier considering all circumstances, which may include the degree of competition, market conditions, quality, location, inflation, value, technology and unique requirements of the procuring agency. The written determination may be based on price analysis (comparison with prices previously paid, prices charged for functionally similar items, prices paid by other consumers, prices set forth in a public price list or commercial catalog, or state estimates) or through the analysis of price-to-unit variations, value analysis (make-or-buy study), or cost analysis. The written analysis must be supported by factual evidence in sufficient detail to demonstrate why the proposed price is deemed to be fair and reasonable. If a determination is made that the prices offered are not fair and reasonable, a decision must be made whether to seek broader competition through a re-solicitation, to revise specifications and re-compete, or to negotiate a better price identified through the price analysis process. A combination of these methods may be necessary.