12.209 Determination of price reasonableness
Source: FAR 12.209 on acquisition.gov
Contracting officers must ensure prices for commercial products and services are reasonable by considering both FAR procedures and customary commercial market practices.
Overview
FAR 12.209 outlines the requirements for determining price reasonableness when acquiring commercial products and commercial services. Contracting officers must establish price reasonableness using the procedures found in FAR 13.106-3, 14.408-2, or subpart 15.4, depending on the acquisition method. The regulation emphasizes the importance of considering customary commercial practices and market conditions, such as delivery speed, warranty terms, seller liability, order quantities, performance period, and specific requirements, when evaluating prices. Ultimately, contract terms, conditions, and prices must align with the Government’s actual needs and reflect what is reasonable in the commercial marketplace.
Key Rules
- Establish Price Reasonableness
- Use the applicable FAR procedures (13.106-3, 14.408-2, or 15.4) to determine if prices are fair and reasonable.
- Consider Commercial Practices
- Take into account customary commercial terms and market factors that influence pricing for similar products or services.
- Align with Government Needs
- Ensure that contract terms, conditions, and prices are appropriate for the Government’s requirements.
Responsibilities
- Contracting Officers: Must determine price reasonableness using the correct FAR procedures and consider commercial market factors.
- Contractors: Should be prepared to justify pricing based on commercial practices and market conditions.
- Agencies: Must oversee that acquisitions reflect both market realities and the Government’s needs.
Practical Implications
- This section ensures that the Government pays fair market value for commercial products and services.
- It requires contracting officers to be knowledgeable about commercial pricing practices and to document their price reasonableness determinations.
- Common pitfalls include failing to consider all relevant commercial factors or not aligning contract terms with actual needs, which can lead to overpayment or procurement delays.
While the contracting officer must establish price reasonableness in accordance with 13.106-3,14.408-2, or subpart 15.4, as applicable, the contracting officer should be aware of customary commercial products and commercial services and conditions when pricing commercial products and commercial services. Commercial product and commercial service prices are affected by factors that include, but are not limited to, speed of delivery, length and extent of warranty, limitations of seller’s liability, quantities ordered, length of the performance period, and specific performance requirements. The contracting officer must ensure that contract terms, conditions, and prices are commensurate with the Government’s need.