Alternative Pricing Principles

Alternative Pricing Principles are the procedures and guidance used in Canadian federal procurement when a contract price is established through an approach that does not fully apply the Cost-Based Pricing Principles. The term describes a departure from the default cost-based method, and it points buyers and suppliers to a different set of guidance.

The idea rests on what federal guidance calls alternatives to cost-based pricing. These are purchasing methods in which the price does not rely on the contractor's cost of fulfilling the statement of requirements. The Government of Canada publishes this guidance for buyers on CanadaBuys, and the term also appears in the Supply Manual glossary.

How Alternative Pricing Principles differ from Cost-Based Pricing Principles

The two sets of principles are defined against each other. Cost-Based Pricing Principles apply when the price is built from the contractor's cost of meeting the requirement. Alternative Pricing Principles come into play when the Cost-Based Pricing Principles are not fully applied, because the price is established by a method that does not depend on that cost.

The distinction is not about the size of the contract or the type of goods or services. It is about the basis on which the price is established. A contract can be priced under the alternative principles whenever the pricing method sits outside the cost-based approach.

What it means for a price not to rely on contractor cost

The statement of requirements describes what the Crown needs delivered. Under a cost-based approach, the contractor's cost of delivering that work is the foundation for the price. Under an alternative approach, that foundation is removed. The contractor's own cost of fulfilling the statement of requirements is not what the price relies on.

This changes the conversation between buyer and supplier. The question shifts from what it costs the contractor to do the work to what basis the price rests on instead. The Alternative Pricing Principles are the guidance that governs that shift.

Where to find the federal guidance

Three Government of Canada resources are the starting points for reading the term in context:

• The buyer's guide section on alternative pricing strategies, which sits within the guidance on cost and profit negotiations.
• The Supply Manual glossary, which records the vocabulary used across federal procurement policy.
• The Practitioner's Guide for Procurement Pricing, which covers pricing practice for federal procurement staff.

Reading these together shows how the alternative principles relate to the cost-based ones, and which guidance a contracting authority is working from.

What it means for a supplier bidding on Canadian public contracts

Suppliers should treat the pricing basis as part of the solicitation, not an afterthought. When a bid is priced under an approach that does not rely on your cost of fulfilling the statement of requirements, the guidance that applies is the Alternative Pricing Principles, not the Cost-Based Pricing Principles.

Before pricing, read the solicitation documents closely to see how the Crown intends to establish the price. Confirm whether the pricing approach is cost-based or an alternative, and prepare your pricing to match. Bid teams that know which set of principles applies can ask better clarification questions and avoid building a cost case where the price is not meant to rest on one.