Is there a law that on government bids, that a bidder can not mark up an item more then X percent?
Thank you
Subscriber Discussion
Are There Markup Limits On Government Bids?
Michael Silva
May 03, 2017This varies depending on the agency and type of work you are bidding. Unless otherwise specified, the general rule is that you not charge the agency more than you would charge your most favored customer for the same or similar products or services.
Other agencies are more specific and require that you show your bare costs, and then limit you to a maximum percentage amount for overhead and profit.
DM
David Matyas
May 03, 2017A customer of mine, showed me a bid that was awarded to a vendor to service them.
The bid has line items and the cost of each item. I noticed on one of the items on the bid, the vendor put the cost per unit at $1650. The cost of the item is about $100. This does not include installation as installation is a different line item on the bid.
And the question is if this is not allowed, does it disqualify the entire bid. Because this is a really funny "completed requisition". It lists all the items that were on the original bid spec sheet, and the price for each item, but then there is a line that that total service and supply to not exceed a much lower amount. For example, if you would add up all the price per items, the total bid would come out to be about $40k but the total not to exceed is less then $13K. So the school is not even getting everything that had requested.
Michael Silva
May 03, 2017It perfectly OK for an agency to request a list of "unit prices" for a wide variety of items, but only have a budget for a small percentage of them. The unit prices simply become a list of options for them to pick from, but they are under no obligation to buy all (or even any) of them.
If this was a competitive bid situation, the normal practice would be to assume a quantity of one for each unit price item, total them all up, and then determine the low bidder based on this number. But remember, this is just for bid evaluation purposes - the agency is under no obligation to buy the items.
If the vendor that won the contract marked up all of his items up like he did the $1650 item, I'm surprised that he won the bid. I think that you may have difficulty protesting the markup on a single line item if overall his bid was the lowest.
UI
Undisclosed Integrator #1
May 03, 2017Word of caution: make certain if this is specified that it is actually mark-up and not margin.
Kevin White
May 08, 2017first question I have is "which government?"
Basic government you have Local, State and Federal. Each with their own set of rules and guidelines usually defined (sometimes loosely).
Know the rules for your state and local governments.
As for Federal - There are a lot of agencies and guidelines. Contact the agency OSDBU or contact your local SBA or PTAC. All can easily guide you thru any requirements (or point you in the right direction).
David - on you second post you give some specifics to a bid and you mention School. Schools run by a different set of rules. Some are regulated and written by the school board. BUT if utilizing Federal or State money - most schools will be required to follow the appropriate purchasing guidelines.
If the contractor has "inflated costs" as you stated - that is his bid and can be legal (can also be illegal). As an example: if you have to supply a "specific" device as part of the contract for service and the only place you can purchase is from the MANUFACTURER who is also an integrator. Since you are a competitor (not a customer) they can charge $1650 for this $100 device. BUT you have given the government all legal answers to your bid.
NOTE: as a rule: almost all agencies (local, state and federal) usually reserve the right to "not" purchase that particular device from you - even if listed in bid documents. They can go on internet, GSA or purchasing contract and purchase the device and have the contractor install it. As you stated, his installation costs are already listed in the bid documents.
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