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Government Contracts Monitor

Short Take: Overcharging – The Government May Require Most Favored Customer Pricing

August 25, 2014

By: Lindsay Simmons

The Justice Department recently announced another False Claims Act settlement – this time with Hewlett-Packard Company (HP).  HP has agreed to pay $32.5 million to resolve allegations that it overcharged the U.S. Postal Service (USPS) for commercial information technology products HP delivered to the USPS between 2001 and 2010. Department of Justice Release - August 1, 2014.

According to the Justice Department, HP “overcharged USPS by failing to comply with [the] pricing terms of the contracts, including a requirement that HP provide prices that were no greater than those offered to HP customers with comparable contracts.”  The government alleged that HP “made misrepresentations during the negotiation of the contract regarding its pricing and its plans to ensure it would provide the required most favored customer pricing” to the USPS. 

The government seeks to obtain the best price (the best price given to the most favored customer). While the government recognizes that the terms and conditions of commercial sales vary and there may be legitimate reasons why the best price is not achieved, all of the variables should be discussed during negotiations and the pricing agreement is to be reached in light of these variables.

Lindsay Simmons is responsible for the contents of this Short Take
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