Price Reductions Clause - GSA's Most Favored Customer Clause

Price Reductions Clause (PRC)

GSA’s Version of the Most Favored Customer Clause

Unless your GSA Multiple Award Schedule (MAS) Contract is opted-in to Transactional Data Reporting (TDR), your contract is subject to the Price Reductions Clause (PRC). The Price Reductions Clause is similar to a Most Favored Customer Clause found in commercial contracts.

For traditional GSA MAS Contracts not subject to TDR, the Price Reductions Clause is one of the most important clauses guiding your contract. Like the Most Favored Customer Clause, the PRC impacts not only your GSA MAS Contract sales practices, but also the sales practices related to your Basis of Award (BOA)/Most Favored Customer.

Non-compliance with the Price Reductions Clause can lead to costly mistakes. Educating your team on the PRC is the first step towards compliance.

Learn More About the Price Reductions Clause and How to Avoid Non-Compliance:

What is the Price Reductions Clause?
What Triggers the PRC?
Tips for PRC Compliance
Get Expert Help with the Price Reductions Clause
Read the Full PRC Clause

What is the Price Reductions Clause?

To understand what the Price Reductions Clause is, it’s important to first understand the Basis of Award (BOA). In establishing your GSA MAS Contract, you select a customer or class of commercial customers that most resembles the purchasing habits of the federal government. This customer/customer class becomes your “Basis of Award” or “Most Favored Customer” (MFC).

Your GSA Contract pricing is negotiated based upon pricing and discounts offered to this Basis of Award customer. If you provide your Basis of Award or Most Favored Customer a deduction from their standard pricing, you’re required to notify your GSA Contracting Officer within 15 calendar days. Depending on the circumstances surrounding the discount, you may be required to provide a corresponding discount under your GSA MAS Contract.

What Triggers the PRC?

Anytime you deviate from the standard pricing provided to your Basis of Award or Most Favored Customer, you potentially trigger the Price Reductions Clause. In the following cases, you would be required to provide a corresponding discount under your GSA MAS Contract:

You reduce the pricing with your commercial catalog, pricelist, or any other document used to establish your BOA/MFC.
You provide more favorable discounts or terms and conditions than those listed in your catalog, pricelist, or documentation used to establish your BOA/MFC.
You provide your BOA/MFC a special discount without any extenuating circumstances, such as a special discount for a large order exceeding the maximum order threshold.

What Does Not Trigger the PRC?

A verifiable billing error.
Sales to federal agencies.
Sales under your GSA MAS Contract to any eligible GSA MAS Contract user.
Sales to commercial customers under a firm, fixed-price contract over the maximum order threshold.

Tips for PRC Compliance

The best way to avoid costly mistakes associated with the PRC is to ensure compliance. Comprehensive training, combined with established procedures and internal assessments play a key role in maintaining PRC compliance. Follow the tips below to get started.

Establish pricing and discounting procedures.
Develop a system or procedure to track your Basis of Award/Most Favored Customer discount relationship.
Establish a process for reporting any price reduction.
Educate your government and commercial sales team on the Price Reductions Clause, as well as the pricing and discounting procedures you’ve established to maintain compliance with the PRC.
Evaluate your system and procedures periodically to assess their effectiveness.

Get Expert Help with the Price Reductions Clause

Whether you need training to educate your team on the Price Reductions Clause, or a consultation to assess your PRC compliance, we can help! FEDSched has specialized in the GSA MAS Contract and all the regulations governing the contract since 1986.

Read the Full PRC Clause

Below is the full text of the Price Reductions clause pulled from the General Services Acquisition Manual (GSAM).

552.238-81 Price Reductions.

(a) Before award of a contract, the Contracting Officer and the Offeror will agree upon (1) the customer (or category of customers) which will be the basis of award, and (2) the Government’s price or discount relationship to the identified customer (or category of customers). This relationship shall be maintained throughout the contract period. Any change in the Contractor’s commercial pricing or discount arrangement applicable to the identified customer (or category of customers) which disturbs this relationship shall constitute a price reduction.

(b) During the contract period, the Contractor shall report to the Contracting Officer all price reductions to the customer (or category of customers) that was the basis of award. The Contractor’s report shall include an explanation of the conditions under which the reductions were made.

(c) (1) A price reduction shall apply to purchases under this contract if, after the date negotiations conclude, the Contractor

(i) Revises the commercial catalog, pricelist, schedule or other document upon which contract award was predicated to reduce prices;

(ii) Grants more favorable discounts or terms and conditions than those contained in the commercial catalog, pricelist, schedule or other documents upon which contract award was predicated; or

(iii) Grants special discounts to the customer (or category of customers) that formed the basis of award, and the change disturbs the price/discount relationship of the Government to the customer (or category of customers) that was the basis of award.

(2) The Contractor shall offer the price reduction to the eligible ordering activity with the same effective date, and for the same time period, as extended to the commercial customer (or category of customers).

(d) There shall be no price reduction for sales—

(1) To commercial customers under firm, fixed-price definite quantity contracts with specified delivery in excess of the maximum order threshold specified in this contract;

(2) To Federal agencies;

(3) Made to Eligible Ordering Activities identified in GSAR Clause 552.238-113 when the order is placed under this contract (and the Eligible Ordering Activities identified in GSAR Clause 552.238-113 is the agreed upon customer or category of customer that is the basis of award); or

(4) Caused by an error in quotation or billing, provided adequate documentation is furnished by the Contractor to the Contracting Officer.

(e) The Contractor may offer the Contracting Officer a voluntary Governmentwide price reduction at any time during the contract period.

(f) The Contractor shall notify the Contracting Officer of any price reduction subject to this clause as soon as possible, but not later than 15 calendar days after its effective date.

(g) The contract will be modified to reflect any price reduction which becomes applicable in accordance with this clause.

Federal Schedules has helped businesses of all sizes successfully obtain, manage and grow with GSA and VA Schedule Contracts for more than 35 years. As the leading government contracts consultant, FEDSched provides an unrivaled level of expertise and guidance businesses can trust to navigate the intricacies of the GSA Schedule Contract and stand out in the federal market space.