|Posted on October 8, 2017 at 10:05 PM|
Price Verification - "Basic Procurement Function or Lost Art"
When making a purchase using a State, Federal or Cooperative contract, or even a purchase off a public agency's own contract, that is based on a percent discount off a manufacturers list price; are public agencies performing the extensive due diligence necessary to ensure they are being charged the correct price?
On the surface this seems like a simple question. Why wouldn't the public procurement professional conduct the proper due diligence to ensure they are paying the appropriate contract price?
Based on feedback many of my buyers receive from State, Federal and Cooperative contract holders, which often state "You’re the only agency that asks for all this documentation regarding the appropriate price"; I must question (1) if the State, Federal and Cooperative contract holders just don't want to exert the effort in meeting the due diligence requirements of public agencies or (2) are many public agencies just not performing the required level of due diligence. As with most issues, the truth probably lies somewhere in the middle.
I find that many State, Federal and Cooperative contract holders fail to adequately train their sales force and distributors regarding the contract award. As a result, State, Federal and Cooperative contract holders often provide quotations referencing a State, Federal or Cooperative contract with inaccurate pricing or for items not covered by the contract.
Many State, Federal and Cooperative contracts are based on a percent discount off a specific manufacturer's price list, that was submitted with their bid or proposal. The awarding agency's contract normally limits how often that price list may be updated. Even when a contract holder submits a new price list for approval, it may take the awarding agency months to approve it. This is where the confusion enters for the manufacturer's salesforce and distributors. They are using the most current price list for regular customers, and an older price list for public sector agencies. Quite often, mistakes are made and prices are quoted to public agencies using the wrong price list, resulting in the public agency paying a higher price than provided in the contract.
The second issue I see quite often is that a manufacturer has issued a new price list that contains new products and services; however, their State, Federal or Cooperative contract price list has not been updated to include these additional items. This results in the manufacturer's salesforce and distributors providing quotations to public agencies that reference a contract; however, all the items included on the quotation are not actually covered by the contract.
It is the responsibility of the public procurement professional to conduct extensive due diligence to ensure the procurement adheres to the terms and conditions of the State, Federal or Cooperative contract and that they are being charged the appropriate price. And if the quotation provided by the manufacturer or distributor does not adhere to the contract, be prepared to issue their own solicitation to ensure compliance to their agency's policies and regulations.
NIGP's Public Procurement Practice for the Use of Cooperative Contracts provides a Due Diligence Check List for purchasing from other government contracts. Key best practices include:
Taking the manufacturer's or distributor's word that an item or service is covered by the contract is not a best practice and does not fulfill the required due diligence by public procurement professionals.
Make "Price Verification" a standard best practice in your organization!