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Share Your Thoughts: Establishing an Average Discount Requirement

Hello everyone,

 

At the pre-solicitation meeting held May 15, we discussed our strategy to require vendors to apply an average discount to all non market basket items within the same category.  Vendors expressed concerns with this approach because supplier mark-ups vary from item to item. One alternate solution is to further segment each category into subsets that contain products with similar mark-ups. This approach could allow vendors to offer more comparable discounts.

We want to hear your thoughts on this idea and any other recommendations you may have on how to better establish discounts for non market basket items.

 

 

FSSI MRO Team

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Dave B
<p>From a GSA Vendor perspective, our company already provides GSA discounted pricing via our GSA schedules. As an integrated supply and logistics company, our goal is to source material and provide our customers with best pricing for trade-compliant, US manufactured material. As we purchase equipment and material from a variety of manufacturers and distributors, we often receive price reductions by product rather than commodity group. This allows us to reduce prices&nbsp;at the line item level.&nbsp; If GSA is to require discounts for commodity groups, this would be an AVERAGE discount applied across the commodity group.&nbsp;In this manner, GSA would not be ensured of getting the&nbsp; best price on all commodities.&nbsp; Our suggestion is to request vendors provide the best discounted price up front. Any additional discounts could be offered at the aggregate thresholds identified by GSA.&nbsp;This would ensure the initial prices offered are the lowest available and further discounts coule be provided based upon spend levels.&nbsp;</p>
FSSI MRO Blogger
<p>Thank you for your suggestion.&nbsp; We appreciate your feedback!</p>
stevenyudis
<p>Good Afternoon All,</p><p>I have been thinking about this question for a few days and would like to give you my thoughts on it.</p><p>I know at the meeting on May 15 sevral vendors expressed concerns with the approach of applying an average discount to their non market basket items due to varying supplier mark-ups.</p><p>I do not agree with their approach or thought process and the reason why is that most vendors (contractors) are currently procuring these products from one or more &quot;big box Distributors&quot; such as United Stationers, Lagasse Sweet, ORS Nasco, etc., etc. All of these &quot;big box Distributors<span style="display: none">&nbsp;</span>&quot; purchase these types of products at the highest discount ranges and/or lowest costs since their purchases are all volume-driven. In other words,their buying power&nbsp;for JanSan products and MRO products is very likely equal to&nbsp;that of Grainger&#39;s, Home Depot, and/or some of the other&nbsp;larger big boxes.</p><p>With this being said, most if not all contractors will be working on&nbsp;a cost-up when they price the Core-Item Attachments which actually means that there should be very little mark-up variance from item to item. Furthermore, most contractors will most likely work on a straight cost-up solution meaning that they will price the Core-Item Attachment items with one or perhaps two straight mark-ups. For example, they may price most items at a straight cost plus 10%. By doing this will take the hills and valleys out of the arguement of varying item to item mark-ups.</p><p>I think that the Government will end up getting fewer cost reductions for the non market basket items simply because each additional sub-section will have varying discounts.</p><p>Capp has a large BPA with the Air Force for their (AFTAPP) Air Force Tools and Parts Program Contract. Capp is 1 of 5 contractors to be awarded this BPA. The way that this was done is very similar to way that you originally proposed the FSSI&#39;s in the Draft RFQ form. There was a market basket of Core items which was the manditory quote and it composed of all of the Air Force&#39;s high-usage items. The other part of the quote was for all of the non-market basket items that were part of Capp&#39;s 51V MAS Contract. The non-market basket items were NOT linked to the core market basket items, however, instead, the Air Force asked for a straight percentage off of the current GSA price. This approach not only took out all of the hills and valleys but also simplified the discount/pricing process by making it easier and less confusing, without any additional product [pools and/or MAS Contracts.</p><p>Therefore, the Air Force now has their cake and is enjoying it also because they have leveraged the Core items (market basket) with the best possible pricing based on heavy usage, AND, they have also been given a straight across-the-board discount percentage on the non-market basket items! It is a win-win situation.</p><p>Lastly, I want to point out that I think that one of the reasons that some contractors would want category subsets and tiered discounts is because they may be able to make additional profits on some of these subsets by not extending the Government the LOWEST PRICES POSSIBLE.</p><p>Thank you very much for entertaining my feedback.</p><p>Best Regards,</p><p>Capp, Inc.</p><p>Steven Yudis<span style="display: none">&nbsp;</span></p>
FSSI MRO Blogger
<p>Thank you for your comments.&nbsp; We appreciate your feedback!</p>
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