COST ANALYSIS VS. PRICE ANALYSIS
Andrea O’Neill
Cost/Price Analyst
27 April 2011
Introduction
2
Scope of Session
 30 Minutes of Presentation
 30 Minutes of Question & Answers
 Ask Questions!
Introduction
 Cost/Price Analyst, SMDC 2 years
 Senior Auditor, DCAA 9 years
 BA in Accounting; MBA in Int’l Business; MA in Procurement &
Acq Mgmt, August 2011 Webster
 CPA in State of CO
Cost Analysis vs. Price Analysis
Agenda
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Is this important?
Terminology & Definitions
Certified Cost or Pricing Data
Data Other than Certified Cost or Pricing Data
Proposal Analysis: Price vs. Cost
Which type of analysis should I use?
Price Analysis Techniques
Cost Analysis Techniques
Cost/Price Realism
Cost Analysis vs. Price Analysis
Is this Important?
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What are we talking about?
 Cost or Price proposals submitted to the Government.
Does this apply to me?
 Yes! Contracting Officer required to determine price fair &
reasonable;
 Contract Specialists assist the Contracting Officer with this process.
When does this apply?
 Every proposal must be determined fair & reasonable;
 Cost is mandatory evaluation factor in Source Selection Evaluation
Boards.
Why is this important?
 Responsibility to taxpayers;
 Create fairness to contractors during evaluation process.
Cost Analysis vs. Price Analysis
Terminology/Definitions
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Certified Cost or Pricing Data
Data Other than Certified Cost or Pricing Data
Price Analysis
Cost Analysis
Realism
Reasonableness
Unallowable Cost
Forward Pricing Rate Agreement (FPRA)
Forward Pricing Rate Recommendation (FPRR)
Forward Pricing Rate Proposal (FPRP)
Cost Analysis vs. Price Analysis
Profit / Fee
Exceptions to Certified
Cost or Pricing Data
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Below Simplified Acquisition Threshold (currently
$150,000)
Adequate price competition
Prices set by law or regulation
Commercial Item
Waiver Granted
Cost Analysis vs. Price Analysis
Data Other than Certified
Cost or Pricing Data
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Formerly know as information other than cost or
pricing data.
Data that is not certified and judgmental in nature.
Required if Certified Cost or Pricing Data is not
required.
Cost Analysis vs. Price Analysis
Certified Cost or Pricing Data
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Formally known as cost or pricing data; certified
was implied;
All the facts a prudent buyer/seller would expect to
effect the price;
Verifiable, factual data;
Not based on judgment;
Exceptions apply.
Cost Analysis vs. Price Analysis
Proposal Analysis
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Two types of proposal analysis can be used: price
analysis or cost analysis.
Which type should I use?
Cost Analysis vs. Price Analysis
Proposal Analysis
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Per FAR 15.404-1(a)(2), price analysis shall be used
when certified cost or pricing data are not
required, and cost analysis shall be used when
certified cost or pricing data are required. Cost
analysis may also be used to evaluate data other
than certified cost or pricing data to determine
reasonableness or cost realism.
Cost Analysis vs. Price Analysis
Proposal Analysis
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Certified Cost/Pricing Data = Cost Analysis
Data Other than C/P Data = Price Analysis
Cost Analysis vs. Price Analysis
Price Analysis Techniques
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Compare proposed prices for each offer received
(competition determine reasonableness)*
Compare to previous prices (historical)*
Compute parametric estimating methods
Cost Analysis vs. Price Analysis
Price Analysis Techniques
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Compare with competitive published price lists;
Compare to Independent Government Cost Estimate
(IGCE);
Compare to prices obtained through market
research for same or similar items;
Review analysis of pricing information provided by
the offeror.
Cost Analysis vs. Price Analysis
Cost Analysis Techniques
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When evaluating certified cost or pricing data:
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Reasonableness of proposed costs
Projection of trends
Reasonableness of parametric models
Application of audited or negotiated rates
Cost Analysis vs. Price Analysis
Cost Analysis Techniques
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Comparison of costs proposed by the offeror for
individual cost elements with –
 Actual
costs previously incurred by the same offeror;
 Previous cost estimates from the offeror or from other
offerors for the same or similar items.
 Other cost estimates received in response to the
Government’s request;
 IGCE; and
 Forecasts of planned expenditures.
Cost Analysis vs. Price Analysis
Cost Analysis Techniques
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Verify unallowable cost are not included and offeror
is following disclosure statement (if applicable), FAR
31,32
Analyze to results of make-or-buy decisions when
evaluating subcontract costs.
(Prime to perform cost or price analysis on
subcontract proposals)
Fee – limited to 10% for CPFF and 15% for R&D
Cost Analysis vs. Price Analysis
Proposal Detail
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Cost Analysis Proposal
Price Analysis Proposal
Labor
Labor Price
Fringe
Travel Price
Overhead
ODC Price
Subtotal Labor
Travel
Materials Price
Total Price
ODC
Materials
Subtotal (G&A Base)
G&A
Total Cost
Profit/Fee
Total Price
Cost Analysis vs. Price Analysis
Cost Realism (Price Realism)
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Cost realism is the process of independently reviewing
and evaluating specific elements of each offeror’s
proposed cost estimate to determine whether the
estimated proposed cost elements are:
 Realistic for the work to be performed,
 Reflect clear understanding of the requirements,
and
 Consistent with the unique methods of performance
and materials described in the offeror’s technical
proposal.
Cost Analysis vs. Price Analysis
QUESTION & ANSWERS