Analysis of Pricing Techniques in Determining a Fair and Reasonable Price

The purpose of this thesis is to idenfity the principal techniques used by firms in pricing products for sale to the Government and to examine and analyze the conditions contributing to a firms pricing strategy. A review of writings in marketing, acquisition, and Micro Economics provided the background information necessary to examine how the theories of pricing and profit work together with recent Federal acquisition reforms to influence a firms pricing strategy. Interviews were conducted with Government procurement professionals as well as representatives of industry and academia concerning the methodology used in formulating pricing decisions. It was found that pricing strategies are classified into two categories - cost-based and market-based. These categories include eleven specific pricing strategies. The researcher concluded that recent changes brought about by Federal acquisition reform have accomplished their goal of more closing aligning Federal procurement practices with those of the commercial sector. The changes, however, have presented new challenges to Contracting Officers in determining that the Government pays a fair and reasonable price. Recommendations to improve the Contracting Officers transition to more commercially based procurement practices include continued training of the Federal procurement workforce and the improved documentation of savings realized by acquisition reform measures.