Price Reasonableness

1. Price Reasonableness Jan Giffin, CPPO, CPPB, VCO Department of General Services Division of Purchases & Supply Policy Consulting & Review Procurement Management Account Executive

2. Objectives • Definitions • Laws & Policies • When to Use

3. Definition • Price • Value, Worth • The quantity of one thing that is exchanged or demanded in barter or sale for another • The amount of money given or set as consideration for the sale of a specified thing • The cost at which something is obtained

4. Definition • Reasonable (ness) • Being in accordance with reason • Not extreme or excessive • Moderate, fair • Inexpensive

5. Intent of the Law • Acknowledge the intent of the law in all procurement procedures and behavior. VPPA § 2.2-4300 Declaration of Intent

6. VPPA § 2.2-4300 Declaration of Intent § 2.2-4300 B. “The purpose of this chapter is to enunciate the public policies pertaining to governmental procurement from nongovernmental sources, to include governmental procurement that may or may not result in monetary consideration for either party….”

7. VPPA § 2.2-4300 CDeclaration of Intent • Public bodies obtain high quality goods and services at reasonable cost. • All procurements be conducted in a fair and impartial manner with avoidance of any impropriety or appearance of impropriety. • All qualified vendors have access to public business. • No offeror be arbitrarily or capriciously excluded. • Competition be sought to the maximum feasible degree. • Procurement procedures involve openness and administrative efficiency.

8. VPPA § 2.2-4300 CDeclaration of Intent - Continued • That individual public bodies enjoy broad flexibility in fashioning details of such competition. • Rules governing contract awards be made clear in advance of the competition. • Specifications reflect the needs of the purchasing body rather than being drawn to favor a particular vendor. • The purchaser and the vendor freely exchange information concerning what is sought to be procured and what is offered.

9. Commonwealth of VirginiaAgency Procurement and Surplus Property Manual (APSPM) 1. “General. Public purchasing embraces a fundamental obligation to the general public to ensure that procurements are accomplished in accordance with the intent of the laws enacted by the appropriate legislative body. The intent of the Virginia General Assembly is set forth in the Virginia Public Procurement Act (VPPA)”.

10. APSPM – Price Reasonableness Determination (4.10) • A written price reasonableness determination is required to determine if prices bid or offered are fair and reasonable when: • Competition is restricted or lacking, • The prices offered do not appear to be fair and reasonable, • The decision is made to award to other than the lowest bidder or highest ranking offeror

11. Competition is restricted or lacking • Sole Source • Single Response Purchase • Contract Change • Contract Renewal

12. Price does not appear fair and reasonable • Market conditions • Quality • Location • Inflation • Value • Technology • Unique requirements

13. Award to other than … Lowest Bidder or Highest Ranking Offeror • If language was included in the solicitation to do so • Document why

14. Determination • Price analysis • Comparison of previously paid prices • Prices charged for similar items • Prices paid by other consumers • Prices set forth in a public price list / catalog

15. Determination - continued • Price to unit variations • Value analysis (Make or Buy) • Cost Analysis

16. Document • Document • Document

17. Not fair and reasonable • Next steps • Rebid – expand competition • Revise specifications • Negotiate a better price

18. Importance • Sound Business Practice • Conserve spending where resources are limited

19. Questions?