Contract Pricing Principles. What is pricing? Pricing: The process of establishing a reasonable amount or amounts to be paid for supplies or services.

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Presentation transcript:

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.amountprincipalclientproject ownerpayscontractorcompletioncontractterms and conditionsmodificationscalledcontract 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.material term

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.damagesexpectancy interestreliance interestpromissory estoppel

The End THANK YOU!

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