Table of Contents
State Procurement Manual Homepage |
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State Procurement Manual
Fair Market Price
| Number |
Section |
| PRO-K-3 |
Work Center |
| Effective |
Replaces |
Agencies Affected |
| 10-4-02 |
5-1-92 |
All |
Authority: Wis. Stats. 16.752; 104.01(6); 104.07
Scope:
- to establish policy to determine whether a work center's price for a commodity/service is the fair market price
Definitions:
- "Cost analysis" means a work center's information documenting its anticipated costs to produce a single unit of a product or a month of service.
- "Fair Market Price” means the price for a commodity/service that compares favorably to the price available from other industry sources.
Policy:
The agency may award a procurement contract or continue to contract with a work center only if the price/cost of the commodity/service satisfies the requirements of fair market price.
Content:
- Fair market price must be determined for an initial price when awarding a new contract, for any price increases to an existing contract or at annual review.
- Any request for bid/proposal sent to WCs will include a Cost Analysis and Appreciable Contribution Work Sheet—Initial Cost (SUB-008). To bid for a contract under the State Use Law, a certified work center (WC) must complete and submit a SUB-008.
- A WC’s cost analysis is not weighed in a proposal evaluation unless similar information from non-WC vendors would also have been used in a similar procurement.
- When a WC requests a price increase for a commodity/service, the WC must complete and submit the Cost Analysis and Appreciable Contribution Work Sheet—Price Increase (SUB-007).
- Preparing and reviewing a cost analysis and appreciable contribution work sheet (SUB-008 or SUB-007):
- A cost analysis is used as a basis for establishing the fair market price of a commodity/service. A WC must:
- Adhere to Cost Analysis and Appreciable Contribution Work Sheets Definitions and Guidelines; and
- Complete the necessary work sheet applicable to either an initial cost or a price increase.
- The contracting entity (i.e., the Bureau of Procurement for a statewide contract or an agency for its own contract):
- Requests any additional or back-up information necessary to clarify the work sheet.
- Reviews the work sheet using the following criteria, as well as other market indicators to determine fair market price:
- The cost of commodities/services if purchased in similar quantities from a non-WC vendor that is currently selling similar commodities/services; for example current state contract prices must receive serious consideration.
- The average of bids/proposals, including the low bid, on the most recent solicitation which are not more than thirty-five percent (35%) above the low bid.
- The usual, customary, and reasonable costs of manufacturing, marketing, and distribution.
- Appropriate indices for general inflationary or deflationary trends such as the index of manufacturers price increases, the consumer price index, the consumer price index for urban wage earners, etc.
- When the WC is requesting a price increase, develop specifications and obtain samples from a current WC contract, then solicit bids and samples from non-WC vendors.
- If the WC’s price compares favorably to the fair market price, and the WC meets the appreciable contribution requirements (see PRO-K-5, Appreciable Contribution), then the contracting entity enters into a contract or amends an existing contract.
- If a WC is not considered to be at fair market price, the agency will:
- Inform the WC it has not met the fair market price criteria;
- Provide evidence related to the calculation of the fair market price;
- Specify a response date by which the WC must challenge the fair market price calculation or lower their price; and
- Negotiate with the WC if they receive a written response challenging their fair market price calculation. If they cannot reach an agreement, the agency will provide a written notification to the State Bureau of Procurement.
- For disputes between the agency and the WC regarding fair market price, the agency will:
- Document all actions taken to resolve the conflict.
- Contact the coordinator of the State Use Program if a WC responds but is not awarded the contract due to a failure to resolve the conflict.
- The coordinator will review the response, facilitate further negotiation and make the final resolution.
- If the agency or coordinator determines that the cost is at fair market price, the agency will proceed in developing the contract.
- If agreement still cannot be reached, the coordinator may terminate contract development.
    
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