Price Support

Price support is documentation or other evidence used to substantiate that a proposed or negotiated price is fair and reasonable. In Canadian federal procurement, it includes market prices, invoices, published price lists, cost breakdowns, price certifications and comparable transaction evidence, as described in the Practitioner's Guide for Procurement Pricing from Public Services and Procurement Canada (PSPC).

The term comes up mainly in procurement pricing and cost-and-profit negotiations. It matters most when a buyer has to judge whether a price is reasonable without the benefit of several competing bids. In those cases the supplier supplies the evidence, and the buyer validates it before accepting the price.

What counts as price support in federal solicitations

Federal tender documents spell out the forms of evidence a buyer can request. One CanadaBuys solicitation lists paid invoices, a price breakdown, price or rate certifications and other supporting documentation. Another CanadaBuys solicitation states that, if requested, a bidder may have to provide a current published price list showing the percentage discount available to Canada.

• Current published price lists or catalogues, including the discount offered to Canada
• Paid invoices for comparable sales of the same or similar goods or services
• Cost-and-profit breakdowns covering elements such as labour, materials, overhead, transportation and profit
• Price or rate certifications
• Other documentation the solicitation requests

The solicitation determines which documents are acceptable and whether the request is discretionary or mandatory.

When buyers ask for price support

CanadaBuys guidance on special cost considerations directs buyers to obtain price support from the offeror in certain non-competitive procurements, including goods or services quoted by a principal. Buyers also verify trade discounts and applicable transportation, foreign-exchange, customs-duty and brokerage costs.

For commercial goods or services acquired without competition, the same guidance says a fair price can be negotiated using recent prices paid, published price lists or catalogues, or prices paid by other governments and comparable organizations. The buyer must obtain and validate sufficient price support before accepting a supportable commercial price.

Price support is also used when competition is thin. A federal audit reports that price-support documentation was used to assess whether contract prices were fair and reasonable, including in non-competitive files and in competitive processes that produced only one responsive bid. A Correctional Service Canada tender allows the department to request price support when fewer than three responsive Phase Two bidders remain, with evidence such as comparable paid invoices or a detailed price breakdown.

The mandatory price support threshold

PSPC's Practitioner's Guide for Procurement Pricing identifies a mandatory price support threshold. The guide reports that the threshold was increased from $1 million to $7.5 million. Above the threshold, price support is required as part of establishing and validating a fair and reasonable price.

The Price Support Directorate and cost and profit assurance

Price Support is also part of the name of a PSPC unit, the Price Support Directorate, which provides pricing-related assurance services. A PSPC evaluation describes the broader Cost and Profit Assurance Program as supporting domestic and international contracts. Most of its assurance work is conducted on defence contracts, and non-defence work can be performed when requested.

What price support means for a supplier bidding on Canadian public contracts

Suppliers should keep price evidence ready before a solicitation closes. Current price lists, recent paid invoices for comparable work, and cost breakdowns by labour, materials, overhead, transportation and profit are the items buyers most often request. Sole-source offers and one-bid situations are the most likely to trigger a request.

When a request arrives, provide the evidence within the requirements of the solicitation or contracting authority. The evidence must substantiate the price you proposed. Read the price support clause in each tender, because it sets out which documents are accepted and whether the request is discretionary or mandatory.