FAR 3.501—Buying-in.

Definition.

FAR 3.501-1 defines the term "buying-in" for purposes of the procurement integrity and contract pricing rules in this subpart. The section explains that buying-in occurs when a contractor submits an offer below anticipated costs with the expectation of recovering the shortfall later, either by increasing the contract amount after award through unnecessary or overpriced change orders, or by obtaining follow-on contracts at inflated prices to make up losses. This definition matters because it identifies a pricing tactic that can distort competition, undermine fair and reasonable pricing, and shift costs to the Government after award. In practice, the definition is used to recognize and address situations where an apparently low bid or proposal is not a genuine efficiency gain but a strategy to win work and then recover profit later. It also helps contracting officers, program officials, and auditors distinguish legitimate aggressive pricing from conduct that may signal risk of post-award cost growth or unfair follow-on pricing. The section is narrow but important: it does not itself prohibit every below-cost offer, but it frames the conduct that the rest of the subpart is intended to discourage and manage.

General.

FAR 3.501-2 explains the Government’s basic policy for preventing and responding to “buying-in,” which is when a contractor submits an artificially low price to win an award and then tries to recover the loss later. This section covers the risks of buying-in, the contracting officer’s duty to take action so losses are not recovered through the pricing of change orders or follow-on contracts subject to cost analysis, and the Government’s preferred ways to reduce the opportunity for buying-in in the first place. It specifically addresses using multiyear contracting with a price for the total multi-year quantity, using priced options that together with the firm quantity equal the program requirement, and other safeguards such as amortization of nonrecurring costs and treatment of unreasonable price quotations. In practice, this section is about protecting competition, preventing hidden cost recovery, and avoiding contract performance problems that can arise when a contractor underprices work at the outset. It gives contracting officers tools to structure solicitations and evaluate pricing so the Government pays a fair price across the life of the requirement, not just at award.