As the world grapples with the ongoing supply chain and global crisis, governments around the globe are being forced to reassess their priorities and strategies. For Fiji, this means finding ways to make government contracts more flexible and adaptable to changing circumstances. Contracts should be able to accommodate changes in circumstances, such as changes in market conditions, technological advances, or changes in laws and regulations. Fixed or listed price contracts must be reassessed by Ministries and Evaluation teams for relevance based on market conditions.
For this blog, we will discuss in particular how to revamp pricing strategies to reflect the new realities of the world we live in.
Here are six (6) strategies that can help make pricing in Fijian government contracts more flexible and effective:
- Dynamic Pricing
One strategy that could be adopted is dynamic pricing. This pricing strategy involves adjusting the price of goods or services based on supply and demand. In the case of government contracts, this would mean adjusting the price based on changes in the market, such as fluctuations in commodity prices or changes in labor costs. For example, Fiji Procurement Office use this for fuel contract. Fuel price is tied to the market prices released by Fiji Competition and Commerce Commission(FCCC) and automatically updates contract price. Dynamic pricing can help ensure that the government is paying a fair price for goods and services, while also allowing for flexibility when market conditions change.
- Rate based contracts
In Fiji we usually call this open rate-based contracts (for Ministries) and Standing Offer contracts (for whole of Government). This approach allows customers to pay only for the products or services they use at a pre-arranged rate. This approach allows government access to the goods or services for a pre arrange time without having to recall tenders or quotations.
- Open rate based conracts
This is an extension of rate based onctracts where Ministry allow for several suppliers ypo provide the good, services or works. This is usually used by FPO in their standing offer contracts
- Discount pricing
This is involves the market price of a product or service less an agreed discount rate. This can be applied based on volume, bundle purchasing or for all purchases (for long term contracts) FPO uses this pricing strategy for its hardware contracts.
- Seek approval on price adjustment clause
This clause allows parties to adjust prices based on specific criteria, such as changes in the cost of goods or services, changes in market conditions, or changes in inflation rates. By including a pricing adjustment clause, parties can ensure that prices remain fair and reasonable over time. For example, some ministries request the Government Tender Board approval on a fixed prices plus an allowance for a price variation buffer up to 5% or more
- Build in renegotiation options in the contract
This could include options for early termination, renewal, or renegotiation of the pricing terms. By building in renegotiation options, parties can ensure that prices remain fair and competitive over time, and that the contract remains relevant to their changing business needs. For example, some Ministries allow prices to be fixed over a certain period after which renegotiation of price will occur.
It is important that Ministries consider long-term contracts where relevant to support flexible pricing. By entering long-term contracts, the government can ensure a stable supply of goods and services, while also allowing for flexibility when prices fluctuate. Longer-term contracts can also help build stronger relationships with suppliers, leading to better quality products and services over time.
In conclusion, the geopolitical crisis and supply chain vulnerability era requires government to be more flexible and adaptable than ever before. Contract flexible pricing models are one way for businesses to remain competitive and respond to changing market conditions.