My price analysis is lower than the proposed price. Now what?

Note: Before proceeding, consult your company’s policies and procedures as to how to move forward in this situation. Most companies have a set of documentation that is required to be filled out if negotiations cannot result in a price that is determined “fair and reasonable.”

 

While the objective of price negotiations is to obtain a price that is “fair and reasonable,” the inability to do so does not preclude you from placing the purchase order. It’s important to document this.

 

Resist the urge to change your price analysis so that it matches the supplier's final price!

If the supplier’s “best and final offer” is higher than that which you’ve determined “fair and reasonable,” then there are a couple of courses of action you could take:

1. If the supplier provided additional information during negotiations that would impact your price analysis, then create a revision to your analysis to include this information. Make sure that this is also discussed in your internal negotiation notes so that an auditor sees proper date alignment between the price analysis and negotiations.

2. If no additional data was provided that would impact your price analysis, then it’s important that you have a complete record of all the offers that changed hands during negotiations. An auditor will want to see that you set forth a reasonable effort to negotiate and that, in the end, the price offered is “best obtainable.” If this is the case, refer to your company’s policies and procedures for specific documentation requirements. Typically, this will require that authority to proceed is provided by Management.

See also What if I can't negotiate my supplier's price down to the price analysis value?