19.807 Estimating fair market price
Source: FAR 19.807 on acquisition.gov
Contracting officers must use thorough cost and price analysis, including recent comparable awards and commercial data, to ensure fair market pricing for 8(a) contracts.
Overview
FAR 19.807 outlines the procedures contracting officers must follow to estimate the fair market price for work to be performed by an 8(a) contractor under the Small Business Administration (SBA) 8(a) Program. The section ensures that the government pays a reasonable price while supporting small disadvantaged businesses. It details the sources and methods for estimating fair market price, including cost or price analysis, commercial price comparisons, in-house estimates, and data from the SBA, the 8(a) contractor, or other government agencies. For repeat purchases, it emphasizes using recent award prices for comparable work, with adjustments for any differences in requirements or market conditions.
Key Rules
- Requirement to Estimate Fair Market Price
- Contracting officers must estimate the fair market price for 8(a) contracts.
- Methods for Estimating Price (Non-Repeat Purchases)
- Use cost or price analysis, commercial prices, in-house estimates, and data from the SBA, the 8(a) contractor, or other agencies.
- Methods for Repeat Purchases
- Consider recent award prices for comparable work, adjusting for differences in specifications, quantities, terms, and market changes. Use price indices and commercial price comparisons as needed.
Responsibilities
- Contracting Officers: Must conduct thorough price estimation using specified sources and methods, and document the rationale for the estimated fair market price.
- Contractors: Should provide accurate cost or pricing data when requested.
- Agencies: Ensure oversight and compliance with fair market price estimation procedures for 8(a) acquisitions.
Practical Implications
- This section ensures fair and reasonable pricing for 8(a) contracts, protecting government interests while supporting small businesses.
- Accurate estimation prevents overpayment and supports program integrity.
- Common pitfalls include failing to adjust for differences in repeat purchases or neglecting to use all available data sources.
(a) The contracting officer shall estimate the fair market price of the work to be performed by the 8(a) contractor.
(b) In estimating the fair market price for an acquisition other than those covered in paragraph (c) of this section, the contracting officer shall use cost or price analysis and consider commercial prices for similar products and services, available in-house cost estimates, data (including certified cost or pricing data) submitted by the SBA or the 8(a) contractor, and data obtained from any other Government agency.
(c) In estimating a fair market price for a repeat purchase, the contracting officer shall consider recent award prices for the same items or work if there is comparability in quantities, conditions, terms, and performance times. The estimated price should be adjusted to reflect differences in specifications, plans, transportation costs, packaging and packing costs, and other circumstances. Price indices may be used as guides to determine the changes in labor and material costs. Comparison of commercial prices for similar items may also be used.