FAR 15.402—Pricing policy.
Plain-English Summary
FAR 15.402 sets the core pricing policy for negotiated procurements: contracting officers must buy supplies and services from responsible sources at fair and reasonable prices. It explains how the contracting officer establishes price reasonableness, including when certified cost or pricing data are required under FAR 15.403-4 and when only data other than certified cost or pricing data may be used. It also sets the preferred order for obtaining pricing information, starting with no additional offeror data when adequate price competition exists, then moving to market and sales data, and only as needed to cost data. The section emphasizes that the Government should request only the type and quantity of data necessary, using price analysis, cost analysis, and cost realism analysis as appropriate, and requiring more data only if needed to support a fair and reasonable price determination. It further requires that each contract be priced separately and independently, without using losses or profits from other contracts or proposed price reductions elsewhere as evaluation factors. Finally, it prohibits including a contingency amount in the contract price when the contract already provides a price adjustment for that contingency, preventing double counting and unsupported pricing cushions.
Key Rules
Fair and reasonable pricing
The contracting officer must ensure supplies and services are purchased from responsible sources at fair and reasonable prices. This is the basic pricing standard for negotiated acquisitions under this section.
Use required cost data
If certified cost or pricing data are required by FAR 15.403-4, the contracting officer must obtain them, along with any additional data other than certified cost or pricing data needed to support the price determination.
Limit data requests
When certified cost or pricing data are not required, the contracting officer must obtain only the data needed to establish a fair and reasonable price. The rule favors minimal, targeted requests rather than broad or burdensome data demands.
Follow data preference order
The contracting officer should generally use a hierarchy: no additional offeror data when adequate price competition exists; then price-related data such as catalog, market, and sales data; and only if necessary, cost data. If offeror data are needed, they must include at least prior sales price information unless an exception applies.
Use appropriate analysis
The contracting officer should use price analysis, cost analysis, and/or cost realism analysis to determine whether the price is fair and reasonable. If the available data do not support that conclusion, additional data must be requested.
Price contracts separately
Each contract must be priced independently. The contracting officer may not use proposed price reductions on other contracts or losses/profits from other contracts as an evaluation factor in the current pricing decision.
No contingency double counting
A contract price may not include an amount for a specified contingency if the contract already provides for a price adjustment when that contingency occurs. The price should not include both the contingency allowance and a separate adjustment mechanism for the same event.
Responsibilities
Contracting Officer
Determine that the source is responsible and the price is fair and reasonable; obtain certified cost or pricing data when required; request only the minimum data necessary; choose the appropriate analysis method; seek additional data if the existing record does not support the price; price each contract independently; and exclude prohibited contingency amounts.
Offeror/Contractor
Provide the certified cost or pricing data when required and submit only the data requested that are necessary to support price reasonableness. If the contracting officer needs offeror-supplied pricing support, the contractor must provide adequate prior sales or related pricing data unless an exception applies.
Agency
Support acquisition practices that promote fair and reasonable pricing, including use of internal and external pricing data sources and analytical tools. Agencies should avoid unnecessary data demands that increase proposal preparation costs and acquisition lead time.
Practical Implications
This section is the foundation for pricing negotiations: if the contracting officer cannot explain why the price is fair and reasonable, the award is vulnerable to protest, audit findings, or defective pricing issues.
Contractors should expect targeted data requests, not open-ended demands. Overbroad requests can slow the procurement and increase proposal preparation costs, but the Government can still require more data if the initial record is insufficient.
Adequate price competition can reduce the need for additional offeror data, but it does not eliminate the contracting officer’s duty to document reasonableness.
A common mistake is relying on pricing outcomes from other contracts as a shortcut. FAR 15.402 requires each contract to stand on its own, so cross-contract losses, profits, or discounts generally cannot drive the current price decision.
Another common pitfall is including a contingency cushion in the price while also writing a contract clause that adjusts price if the contingency occurs. That can result in double recovery and an unsupported price.
In practice, the section pushes both sides toward disciplined pricing support: the Government should ask for only what it needs, and contractors should be ready to justify price with market, sales, or cost information depending on the acquisition context.
Official Regulatory Text
Contracting officers shall- (a) Purchase supplies and services from responsible sources at fair and reasonable prices. In establishing the reasonableness of the offered prices, the contracting officer- (1) Shall obtain certified cost or pricing data when required by 15.403-4 , along with data other than certified cost or pricing data as necessary to establish a fair and reasonable price; or (2) When certified cost or pricing data are not required by 15.403-4 , shall obtain data other than certified cost or pricing data as necessary to establish a fair and reasonable price, generally using the following order of preference in determining the type of data required: (i) No additional data from the offeror, if the price is based on adequate price competition, except as provided by 15.403-3 (b). (ii) Data other than certified cost or pricing data such as- (A) Data related to prices ( e.g. , established catalog or market prices, sales to non-governmental and governmental entities), relying first on data available within the Government; second, on data obtained from sources other than the offeror; and, if necessary, on data obtained from the offeror. When obtaining data from the offeror is necessary, unless an exception under 15.403-1 (b)(1) or (2) applies, such data submitted by the offeror shall include, at a minimum, appropriate data on the prices at which the same or similar items have been sold previously, adequate for evaluating the reasonableness of the price. (B) Cost data to the extent necessary for the contracting officer to determine a fair and reasonable price. (3) Obtain the type and quantity of data necessary to establish a fair and reasonable price, but not more data than is necessary. Requesting unnecessary data can lead to increased proposal preparation costs, generally extend acquisition lead time, and consume additional contractor and Government resources. Use techniques such as, but not limited to, price analysis, cost analysis, and/or cost realism analysis to establish a fair and reasonable price. If a fair and reasonable price cannot be established by the contracting officer from the analyses of the data obtained or submitted to date, the contracting officer shall require the submission of additional data sufficient for the contracting officer to support the determination of the fair and reasonable price. (b) Price each contract separately and independently and not- (1) Use proposed price reductions under other contracts as an evaluation factor; or (2) Consider losses or profits realized or anticipated under other contracts. (c) Not include in a contract price any amount for a specified contingency to the extent that the contract provides for a price adjustment based upon the occurrence of that contingency.