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Price Reduction Based on a Fixed Amount - Single Product Example

 

In this example the school needs to procure apples. The school decided to use “geographic preference” which is allowable for unprocessed locally grown and locally raised agricultural products. When developing the solicitation document the decision to use geographic preference was based on the following concerns and considerations;

  • Due to large out of state producers putting competitive pressure on local producers to sell at or below cost, the school decided it could afford to pay a little extra if needed for locally grown apples.
  • Also local school board was concerned about the carbon footprint for shipping the apples hundreds of miles for such a small purchase.
  • Although it wasn’t mandatory, teachers and nutritional staff from the school’s food service department wanted to work together to educate students on how apples are grown and it would be nice if a producer would be able to do a presentation. 

Based on the above concerns and considerations the school developed the following “3 bids and a buy” bid and evaluation matrix for procuring apples:

Single Product: Apples

Producer A

Producer B

Producer C

If awarded the contract producer agrees to:

  • · F.O.B. to school address; Price includes delivery charges.
  • · Pricing good for school year (Sept. 2012 – June 2013)
  • · Orders will be placed every two weeks starting Sept. 2012
  • · School estimates they will order about 500 carton tray ·         packs during Sept. 2012 – June 2013 time frame.
  • · Payment will be made 30 days after receipt of invoice.

Yes

Yes

Yes 

Producer available for presentation - not mandatory. Yes Yes No

If awarded the contract producer will provide APPLES:

· Package: cartons tray pack,

· Variety: RED DELICIOUS,

· Grade: U.S. Extra Fancy,

· Item size 65 case count,

Appearance: Fine appearance

 

Yes

Yes

Yes

Geographic Preference – within 50 miles of school Yes – 30 miles Yes – 40 miles No – 450 miles
Offeror Price (Per carton tray pack) $32.00 $31.50 $30.50

Total Geographic Preference 

(-$1.25)

(-$1.25)

$0.00

Evaluated Price

$30.75

$30.25

$30.50

Awarded Contract To:

 

X

 

 Notes: All producers were responsive and responsible producers;

  • Producer C was not able to provide local apples but was evaluated fairly without use of a geographic preference. (even without geographic preference producer C was more competitive than producer A)
  • Producer B was awarded the contract for purchasing apples based on lowest cost after geographic preference was applies.
  • Producer B will be paid $31.50 per carton tray pack as agreed to in the offer.