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Price Reductions Over the Maximum Order Threshold

There has been some confusion regarding the applicability of the Price Reductions clause for orders exceeding the maximum order threshold (MOT) in relation to cancelled clause I-FSS-125. The GSA Office of Inspector General (OIG) audit report, Applicability of Price Reductions Over the Maximum Order Threshold, identified a small pool of vendors who have cited cancelled clause I-FSS-125 as the basis for not passing on price reductions to Government customers when the order is over the MOT. The vendors claim that the “plain language” of clause I-FSS-125 (i.e., the PRC is not applicable to orders placed over the MOT in FAR 52.216-19) exempts such sales from the application of the PRC.

 

GSA’s interpretation of the parenthetical language in I-FSS-125(b)(1) is it refers to Government orders where the ordering activity has requested a reduced price/discount. It emphasizes that offering a discount to a Government customer will not trigger a price reduction. However, price reductions may be triggered by changes to the commercial catalog and/or sales to the BOA customer (or category or customers). And if price reductions are triggered, the resulting price reductions must be passed on to Government customers in accordance with GSAM Clause 552.238-75(c)(2), regardless of order size.

 

As noted above, I-FSS-125 was cancelled in 2004. However, the clause and similar language still remains in a small number of Federal Supply Schedule (FSS) contracts. GSA will issue a Mass Modification to delete any remaining I-FSS-125 clauses, and all similar language, from existing FSS contracts.

 

For more detail see FAS Instructional Letter 2013-06 posted on DATA.GOV.

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