Over the course of the 20 year GSA Contract, you will need to have a good understanding of your options when it comes to increasing your prices. You actually must decide this at the time of submitting your GSA Schedule offer documents to GSA for review.
For some Contractors, this is a no-brainer. Just stick to the current practices. But for others, it is extremely important to think through the implications for each of the 3 options here.
Here are those options as well as some notes from a GSA Consulting expert:
EPA METHOD
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ToggleIf proposed pricing is based on a published or publicly-available commercial price list, submit a copy of the company’s current, dated, price list, catalog, or standard rate sheet (note that this must be an existing, standalone document, and not prepared for purposes of this solicitation). Future price adjustments for pricing based on a commercial price list are subject to clause 552.216-70 Economic Price Adjustment – Multiple Award Schedule Contracts.
This is the most common, it allows you to increase your prices as you see fit.If you offer products, then this is the best option for you. If you offer services and mostly work with Commercial Customers, then this is probably the best option. You must keep to within GSA set limits per year (5% – 10%). Note that for this method, the GSA may require that you have the prices posted on your website.
ANNUAL ESCALATION
If proposed pricing is based on commercial market prices, future price adjustments are subject to clause I-FSS-969 Economic Price Adjustment – FSS Multiple Award Schedule. The offeror proposes a fixed annual escalation rate of XX% in accordance with I-FSS-969 paragraph (b)(1)
This option is only for established Government Contractors offering Services .If this is your Company, then you are probably already very familiar with the Annual Escalation method. If you go with Annual Escalation, then you must make sure that your discounting to your Basis of Award customer never inflates beyond where your GSA pricing is at or you could trigger the Price Reduction Clause. Note that the GSA is only allowing Annual Escalation of 2.3% to 2.5% as of 2020, so if your prices fluctuate beyond that, then this may not be a good option.
MARKET INDEX
If proposed pricing is based on commercial market prices, future price adjustments are subject to clause I-FSS-969 Economic Price Adjustment – FSS Multiple Award Schedule. The offeror proposes a relevant market indicator (e.g., the Bureau of Labor Statistics Employment Cost Index (ECI)) in accordance with I-FSS-969 paragraph (b)(2).
In almost no circumstance is this favorable for a GSA Contractor. Market Indexes over a 3 year average have been so consistently low, that most companies would be damaged by having this governing their pricing. The only scenario where this could work is if your costs are directly tied to a market index, then this could make for pretty easy management of your price increases. I have never found a company that this would work for, though. And it has been almost 15 years.
