Pricing - Team Approach

This page is an extract from the full topic guidance on Pricing – Team Approach [71KB PDF]. It details any Constraints associated with the team approach to pricing, provides a summary of the Authoritative Guidance and lists any essential reading, further reading or associated documents.

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Constraints

None.

Authoritative Guidance Summary

The procurement strategy should address the pricing aspects of the requirement and allow realistic timescales for tenderers to put together their tender response; for Ministry of Defence (MOD) price investigation; and for negotiation of prices, terms and conditions.

A pricing team including:

representatives from the acquisition team (commercial, technical, financial),
the customer/user,
subject experts,
Cost Assurance and Analysis Service (CAAS), and
Defence Analytical Services Agency (DASA)

should be established at an early stage to ensure that the Invitation to Tender / Negotiate (ITT / N) clearly specifies the details required for any relevant pricing activities.

The pricing team should at an early stage produce the MOD 'should cost' estimate and, where appropriate, engage CAAS support through the submission of the DEFFORM 122, Request for Technical Cost Investigation Report - Forward Pricing Programme (FPP).

For contracts valued at 1M (one million pounds sterling) or more the pricing team will lead on price investigation/negotiation supported throughout by CAAS. Where negotiations result in an outcome where the price includes estimates above the most likely level recommended by CAAS, the case should be referred to the relevant Director Commercial.

For contracts valued at 250K (two hundred and fifty thousand pounds sterling) to 1M (one million pounds sterling) the pricing team will normally lead and CAAS will be involved as appropriate, but for straightforward contracts valued at less than 1M (one million pounds sterling) the pricing team leader may deem it appropriate to delegate pricing agreement to CAAS.

Ultimate authority for agreeing the price and signing the contract rests with the commercial officer but MOD's negotiating position must be agreed at all stages by the whole pricing team, at a level appropriate to the requirement.

Any discussion with the potential contractor prior to contract award should be on a 'without commitment' basis.

The key to a successful price negotiation is preparation and the pricing team leader is responsible for ensuring that all team members are appraised of their roles, including the contractor. The principles to be followed are outlined under Authoritative Guidance.

Pricing records in appropriate depth are essential and a model format for a combined pricing and post-costing record is provided under Authoritative Guidance.