Contract Pricing Principles What is pricing? • Pricing: The process of establishing a reasonable amount or amounts to be paid for supplies or services Types of price • Commercial prices: Prices being paid by the general public for a product • Competitive prices: Offers received under conditions of adequate price competition • Price analysis: The process of examining and evaluating a proposed price without evaluating its separate cost elements and proposed profit • Reasonable price: Price that a prudent and competent buyer would be willing to pay, given available data Pricing Objectives • To seller, contract pricing has two primary, related objectives: • To cover costs • To contribute to attaining corporate operational objectives What is a Fair and Reasonable Price? • A Reasonable Price • A price a prudent buyer would be willing to pay, given knowledge of: • • • • • • Market conditions Supply and demand General economic conditions Competition Market definition Relative pricing • A Fair Price • Fair to both parties (buyer and seller) under market conditions What is Contract Price? • A contract price is the price listed in the contract for the good or services to be received in return. • Mutually agreed upon total amount that a principal (client or project owner) pays to a contractor on completion of the contract, in accordance with contract terms and conditions and their subsequent modifications (if any). Also called contract sum. Contract law • In contract law, the contract price is a material term. The contract price is the price for the goods or services to be received in the contract. The contract price helps to determine whether a contract may exist. If the contract price is not included in the written contract, then upon litigation the court may hold that a contract did not exist. • In litigation, the contract price is a factor for determining damages upon a party forsaking its contractual obligations. The contract price as a point of reference may help determine the expectancy interest of the party suffering damages as well as the reliance interest along with damages under promissory estoppel. The End THANK YOU!