Predefined Types of Pricing Basis

Predefined types of pricing basis are the standardized basis-of-payment options that a contracting authority identifies for a procurement. In Canadian federal procurement guidance, the recognized options are fixed price, fixed time/unit rate, cost reimbursable, and provisional price. The basis of payment defines how the contract price is built to compensate the contractor.

The more common federal term is basis of payment. It is not a separate contract type called "predefined types of pricing basis." The wording appears in Public Services and Procurement Canada (PSPC) guidance, and the four options come from the federal Practitioner's Guide for Pricing.

The four options in the Practitioner's Guide for Pricing

The guide is intended to help contracting officers choose among four approaches to pricing a contract:

• Fixed price
• Fixed time/unit rate
• Cost reimbursable
• Provisional price, which the guide identifies as a pricing strategy

Each option sets out a different way for the contractor to be paid. A fixed price is a set price. A fixed time/unit rate is a time-based or unit-based rate. A cost reimbursable arrangement is a reimbursable-cost structure. A provisional price is a pricing strategy under which the price is set provisionally. The option selected determines how bidders must construct and submit their prices and how the contractor is paid under the resulting contract.

Where the wording appears in the Supply Manual

The exact phrase "predefined types of pricing basis" appears in the requisition-review checklist in the Supply Manual. The checklist asks whether a requisition contains any form of predefined types of pricing basis. It is part of the review procurement officials carry out before a requirement moves forward. You can find it in the Supply Manual chapter 2 annexes on CanadaBuys.

The checklist item shows that pricing basis is settled early. The contracting authority identifies it as part of reviewing the requisition, before suppliers see a solicitation.

Firm fixed price in NATO and defence solicitations

NATO procurement documents use related expressions, most often firm fixed-price basis and firm fixed-price deliverables contract. A NATO Allied Command Transformation solicitation states that it is a firm fixed-price deliverables contract and that prices must be submitted on a firm fixed-price basis. The solicitation document sets this out directly.

NATO procurement guidance describes a firm fixed-price contract as one that provides a price not adjusted based on the contractor's cost experience. Responsibility for performance costs sits with the contractor. The NATO procurement guidance gives this description. Suppliers pursuing defence and NATO-related work will see these terms in the solicitation and should price accordingly.

What it means for a supplier bidding on Canadian public contracts

Price your bid according to the basis of payment stated in the solicitation. That may be a fixed price, a unit or time-based rate, a reimbursable-cost structure, or a provisional-price arrangement. The contracting authority has already chosen the basis, so a bid that uses a different pricing structure does not follow the solicitation's instructions.

• Read the pricing section of the solicitation first and identify which basis of payment applies.
• Build your price table to match that basis and the cost elements the solicitation requires.
• On a firm fixed-price basis, plan on carrying the cost of performance yourself, since the price is not adjusted for your cost experience.
• Use the Practitioner's Guide for Pricing to see how contracting officers frame these choices.