Price Standardization & Government Contracting

One of the pitfalls of government acquisition and procurement is the effect of the open policy in contract assignment and contract fulfillment based on the discretion of the private contractor. Moreover, the participation of middlemen through sub-contracting undertaken by and between the private contractor and the government may lead to disparity on pricing. In addition, the procurement of goods and manning the delivery of services require a lot of the government’s financing and may cause them to incur a lot of unnecessary costs.

Although the volume of goods is acquired, half of discount gains go to the sub-contractor. Another form of wasted expense on the part of the government is the distribution of products to the recipients wherein contracted private distributors are in-charge of manning the distribution. These typically distributed government products include medicines, textbooks, rations, agricultural production materials and other equipment.

Although there are government efforts to address the unnecessary expenses incurred in acquiring and delivering the goods through institutional distribution, the standardization of pricing does not differ with the prevailing commercial price of commodities in the market. For example, the government-acquired-and-produced medicines labeled as generic are similar to the price of the commercially branded ones. At hindsight, the quality of generic medicine is inferior to the commercially branded medicine.

If this is the case, the government’s purpose for price standardization could be defeated. Moreover, the expenditures of government procurement go along with the incentives received by the private contractor. These incentives could have been transformed into the quantified domestic production of quality goods that may be competitive with the commercial products and could have doubled the supply to the consumers, which would ultimately result in the demand being equal to the price.

However, according to Thomas Nagle’s and Reed Holden’s book, The Strategy and Tactics of Pricing: A guide to Profitable Decision Making, the government pricing of its products may be interpreted as a preference of choice with limited representation to the marketplace. In their book, Nagle and Holden asserted that a company’s pricing strategy should ultimately be value-based or how much is a company’s solution worth to the customer, and how a company best communicates that value in a way that the customer would believe that the price is fair (Nagle and Holden, 2001).

Analysis Generally the main purpose of government contracting with the private sector is to foster strong partnership and participatory governance. However, the flexibility of the open policy in government contracting serves various interests and some of which are conflicting. These conflicts of interests may occur right at the start of the contract assignment when the contracting parties decide on the stipulations. In this case, the contract may lack transparency and may be vulnerable to corruption.

On the other hand, the over commercialization of goods is brought about by the government’s hurdled enforcement policy which complements the incentives to the domestic producers in order to supplant the justification of price disparity and unreasonable price increase that are attributed to cost of production. In addition, instead of transmitting the incentives through single proprietorship of government-contracted private individuals and groups, there is a reduction in incentives on taxes and duties to the trading importers and an imposition of excise tax on exportation to facilitate price standardization and regulation on basic commodities.

Moreover, the strategy and tactics in pricing could be minimized by simply reviewing the policy on consumerism—wherein the consumers should be protected with government regulations and laws on quality and ethical standards of purchasing—that provides the purchasing power for valued basic commodities. It is conclusive that decisiveness of consumers to address the pitfalls of government contracting, unstable pricing mode and the ill-effects of pricing strategies and tactics, could be attributed to the unified efforts to review the overly flexible policy on government contracting .This move is also geared towards price stabilization.

References Blotnicky, K. A. (2001). Chapter 14: Pricing Strategies and Tactics. Fundamentals of Marketing, Ninth Canadian Edition, Mount Saint Vincent University, Halifax, NS. Retrieved February 8, 2008 from http://www. busi. mun. ca/tclift/1201/9fms_pp14. ppt United States Department of Defense (1999). Ethics Issues In Government-Contractor Teambuilding. Retrieved February 8,