On Wednesday May 20, 2020, the US Federal Contractor Registration (USFCR) Academy is hosting a free, live webinar on writing a price proposal. Sign up here to reserve a spot and learn more about discount terms in your price proposal with this blog post.
The government, like any buyer, wants a good deal. When pricing your request for proposal (RFP) or request for quote (RFQ), you should be offering your best pricing to the government to present your company’s offer as fair and reasonable. To offer an incentive for vendors to provide the lowest prices to the government, the government created the option of discount terms.
A discount term is a proposed discount percentage off of the total amount in exchange for accelerated payment of an invoice. This means that a vendor can propose an even lower price than the initial offer if the government agrees to pay their invoice within a certain number of calendar days. Why is this allowed?
According to FAR 52.213-2, “The Contractor’s invoices must be submitted before payment can be made.” The invoice usually will not be accepted by the government until the services are rendered or products are delivered. Once the invoice is submitted, it is paid usually within the standard 30-day period from invoice acceptance.
This means that the vendor could be floating payroll or the costs for products for over the thirty-day period depending on what the contract was for. To expedite the payment, discount terms allows the vendor to propose a different calendar day limit to get paid.
Did You Know?
Discount terms cannot be used in the evaluation process of a contract. According to FAR 52.232-8:
“Discounts for prompt payment will not be considered in the evaluation of offers. However, any offered discount will form a part of the award, and will be taken if payment is made within the discount period indicated in the offer by the offeror. As an alternative to offering a discount for prompt payment in conjunction with the offer, offerers awarded contracts may include discounts for prompt payment on individual invoices. .”
This means that a contracting officer cannot use the discount as part of the overall evaluation, however it will be considered.
Back to Basics
If you are presenting discount terms on your offer, they will be included on the standard form or a signature page. If you are wondering more about how to write discount terms or what a standard form or signature page is, check out USFCR Academy Live.
Every other week, the USFCR Academy hosts a live training regarding an aspect of proposal writing. All past and future webinars can be found on our webinars page for you to access.