8.405-4
Price reductions
Ordering activities must seek price reductions for orders or BPAs exceeding the simplified acquisition threshold, but contractors are not required to extend these reductions to all schedule users.
Overview
FAR 8.405-4 outlines the procedures for requesting price reductions under Federal Supply Schedule (FSS) contracts. Ordering activities (government buyers) may request a price reduction from schedule contractors at any time before placing an order, when establishing a Blanket Purchase Agreement (BPA), or during the annual BPA review. Importantly, if the value of the order or BPA exceeds the simplified acquisition threshold (SAT), the ordering activity is required to seek a price reduction. However, contractors are not obligated to offer the same reduced price to all schedule users; reductions can be limited to the specific ordering activity and transaction involved.
Key Rules
- Price Reduction Requests
- Ordering activities may request price reductions at any time before order placement, BPA establishment, or during annual BPA reviews.
- Mandatory Price Reduction Requests Over SAT
- Ordering activities must seek a price reduction when the order or BPA exceeds the simplified acquisition threshold.
- No Requirement to Extend Reductions
- Contractors are not required to offer the same price reduction to all schedule users; reductions can be specific to an individual order or BPA.
Responsibilities
- Contracting Officers: Must request price reductions for orders/BPAs over the SAT and may do so at other times.
- Contractors: May negotiate price reductions but are not required to extend them to all users.
- Agencies: Should ensure compliance with price reduction requirements for large orders/BPAs.
Practical Implications
- This section ensures government buyers seek the best value, especially for large purchases.
- Contractors can negotiate reductions on a case-by-case basis without affecting their broader pricing.
- Common pitfalls include failing to request reductions for orders over the SAT or misunderstanding the contractor's obligation to extend reductions.