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Fixed Pricing Schedule Inconsistent With Commercial Practice

The Court of Federal Claims issued a declaratory judgment ordering the government to modify a commercial items solicitation for travel management services because the 15-year fixed pricing schedule violated customary commercial practice and the government did not obtain a valid waiver. The solicitation contemplated a 15-year contract consisting of a 3-year base period and 3, 4-year, option periods, but offerors were required to propose a fixed price for each option period. According to the pre-award protester, the requirement to set prices for the option periods at the beginning of the base term was inconsistent with customary commercial practice.

Contrary to Market Research

The court found the pricing terms were contrary to law and invalid. Under FAR 12.301 (a)(2), contracts for the acquisition of commercial items must, to the maximum extent practicable, include only clauses that are consistent with customary commercial practice. Clauses or additional terms that are inconsistent with customary commercial practice may not be included unless a waiver is obtained. In evaluating whether solicitation terms are consistent with customary commercial practice, the government must engage in market research with the purpose of generating "a meaningful exchange of information between the agency and industry." Although the market research here demonstrated a 15-year term was common in complex contracts, the research revealed nothing about whether setting the price for each option period at the outset of a 15-year contract was consistent with customary commercial practice. As a result, the pricing schedule violated FAR 12.301 (a)(2).

Waiver Inapplicable

The government argued it obtained a waiver to exceed FAR 17.204 (e)'s 5-year limit on the duration of government contracts and the waiver extended to the 15-year pricing schedule. However, the waiver only addressed the term of the contract and did not exempt the government from FAR 12.301 (a)(2)'s requirement for solicitation terms to be consistent with customary commercial practice. Moreover, the waiver did not comply with FAR 12.302 (c) because it did not address customary commercial practice or show a need to include terms that were inconsistent with customary commercial practice. ( CW Government Travel, Inc. v. U.S., et al., FedCl, 55 CCF 79,653)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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