GSA Price Reduction Clauses (PRC) in Contracts

Understand how PRC works so you are able to intelligently negotiate a pricing and discount relationship that minimizes inherent risks.

General Services Administration Federal Supply Schedule (GSA FSS) contracts in particular contain the Price Reduction Clause (PRC) which is a potential minefield for the careless or unwary contractor. The PRC basically requires the GSA FSS contractor to offer the Federal Government the same pricing and discount terms the contractor offers to its Most Favored Customer(s) (MFC) at all times the FSS contract is in force. The contractor's MFC was identified at the time the contractor and GSA entered into negotiations and established the pricing and discount relationship that would govern the contract in accordance with the basis of award clause. The government is contractually entitled to the same pricing and discount terms the contractor offers to its MFC under similar terms and conditions. The PRC requires the contractor to maintain that relationship throughout the contract. If the contractor offers a lower price or deeper discount to its MFC during a set period of time, it must offer the same or equivalent lower price or deeper discount to the government during that period. If the contractor does not, especially with knowledge of its noncompliance with the PRC or with a reckless disregard for its compliance, especially over a protracted period of time, this subjects the contractor to a mandatory disclosure obligation or at least a voluntary one and consequently various government actions for recovery including termination for default and re-procurement costs, administrative offsets, false claims act charges leading to treble damages and per invoice fines, or worse, and debarment and suspension. It will also help existing GSA FSS contractors to take appropriate mitigation measures if an internal review indicates that they have not been in compliance with the PRC.