Page 30 - AASBO Winter 2018.indd

BY GARY BARKMAN, CPPB AND BILL MUNCH, CPPO, CPPB

Prohibitions of Cost-Plus-A-

Percentage-of-Cost Contracts?

Barkman Munch

The School District
Procurement Rules in
R7-2-1001 tell us, “Cost-
Plus-A-percentage-of-cost
contract” means a contract
that, prior to completion
of the work, the parties
agree that the fee will be a
predetermined percentage
of the cost of the work.” R7-
2-1092 states, “Subject to the
limitations of this section,
any type of contract that
would be advantageous to
the school district may be
used, except that the use of a
Cost-Plus-A-Percentage-of-
Cost Contract is prohibited.
As we talk with
procurement and business
officials across this great
state of ours, there appears
to be some confusion from
time to time about what type
of contracts are REALLY
prohibited by this rule.
We sometimes hear that
this rule prohibits us from
allowing a vendor to submit
a manufacturer’s price list
with a mark-up. is type of
price list with a mark-up is NOT a Cost-Plus-Percentage-of-Cost- erefore, the cost list from a manufacturer is an “Established
Contract as prohibited by the Procurement Rules. e rest of this Catalog Price.” At least conceptually we believe that is true. As long
article will provide the justi cation for this statement. as a vendor is providing you with a published manufacturer’s price
If we look at R7-2-1001 again it also says, “Established catalog list, they can use that price list and give you a percentage markup
price” means the price included in a catalog, price list, schedule or on the price. is does not constitute a Cost-Plus-Percentage-of-
other form that: Cost-Contract as prohibited by the Procurement Rules. If a vendor
• Is regularly maintained by a manufacturer, distributor or submits a manufacturer’s price list and adds a mark-up, that is
contractor. really a negative discount o a manufacturer’s price list, which is
• Is either published or otherwise available for inspection by acceptable. A 5 percent mark-up is nothing more than a discount
customers. of – 5 percent really!
• States prices at which sales are currently or were last made to a As we did research for this article, we turned to the National
signi cant number of any category of buyers or buyers constituting Institute of Government Purchasing (NIGP) – the foremost
the general buying public for the materials or services involved.”
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30 THE EDGE WINTER 2018

THE EDGE |