Pricing is an important aspect of any business and market exchange of goods and services, and it is especially important in regard to government contracts. There are a number of strategies for deciding the price for a certain product, such as cost-based pricing and market-based pricing, which can be used to determine the price for governmental acquisitions. The government contracts pricing is guided by the 15.402 Pricing policy, which specifies the process.
Cost-based pricing is one of the most effective ways to ensure that there are no losses. It is conducted by including all costs in a price and adding the profit margin to it in order to ensure that the deal will be profitable (Stahl et al., 2018). In other words, it only considers the company’s efforts without any market considerations. Market-based pricing focuses on what customers or government are willing to pay for the product or service. It can lead to a loss, but it ensures that the price is determined in accordance with the market demand. The pricing strategy for government contracts is guided by the regulation 15.402 Pricing policy (“Subpart 15.4—contract pricing,” n.d.). It includes the fact that it is important to present certified cost or pricing data or obtain other types of data to determine a fair price.
In conclusion, pricing is a critical process, which can be achieved through a wide range of means. Cost-based pricing is primarily focused on the company itself, where it factors in the costs for production and adds a profit margin. Market-based pricing refers to the market demand or what consumers willing to pay for the product or service. Government contracts are guided by the 15.402 Pricing policy, which specifies the process of determining a fair price.
Stahl, J. E., Windmark, C., & Kianian, B. (2018). Cost-based pricing for learning organizations – A model presentation and demonstration. Procedia Manufacturing, 25, 239-246. Web.
Subpart 15.4—contract pricing. (n.d.). Web.