• reviewandevaluationoftheseparatecostelementsa ndprofitinanofferor’sorcontractor’sproposal(inclu dingcostorpricingdataorinformationotherthancos torpricingdata),andtheapplicationofjudgementto determinehowwelltheproposedcostsrepresentwh atthecostofthecontractshouldbe,assumingreason ableeconomyandefficiency(FAR15.404(c)(1)). •
6PriceandCostAnalysisCompared PriceAnalysisist • heprocessofexaminingandevaluatingaproposedpri cewithoutevaluatingitsseparatecostelementsandp roposedprofit. Determineswhetherthepriceisfair andreasonable. CostAnalysis Evaluatesthesepara tecostelements,profit,andfacilitiescapitalcostofm oney(ifproposed). Usedtoevaluate/determineany orallofthefollowing: costand/orpricereasonablen ess costrealism mostprobablecostand/orprice It isthemorecostlymethodintermsoftimeandmanpo wer.
Cost analysis • Evaluates the separate cost elements , profit , and facilities capital cost of money (if proposed). Used to evaluate/determine any orall of the following : • Cost and/or price reasonableness • Cost realism • Most probable cost and/ or price • Itisthemorecostlymethodintermsoftimeandmanp ower.
Price analysis • Istheprocessofexaminingandevaluatingaproposedpric ewithoutevaluatingitsseparatecostelementsandprop osedprofit.
• Determineswhetherthepriceisfairandreasonab le.
7CostAnalysis:Whentoapplyit. Itisperformedifcertified • costorpricingdataarerequired. Itmaybeusedtoevaluatei nformationotherthancostorpricingdata,e.g.,noncertifiedcostdata. Normally,itisnotneededifadequatepr icecompetitionexists.Inthiscase,itstillmaybeusedifthepr iceisdeterminedtobeunreasonableoryouareconsidering acostrealismevaluation[seeFAR15.305(a)(1)]. Costanal ysisisoneoftheapproachesthatshouldbeusedwhenacost realismevaluationisrequired. Whenyouperformacostan alysis,youshouldalsoincludeapriceanalysistoverifypricer easonableness. Section2DefiningCostsPerformingaCostAnalysisExampl • es:ProposedPricebyMajorCostElement
CostAnalysis:FirstStep Presolicitationinvolvementbytheprice/costanalyst(FSO)and engineer(ESO)isrecommended Price/costinput Sectio nBsetup,Price/CostEvaluationTemplate,SectionLprice/costdat arequirements,andSectionMprice/costevaluationfactor s Engineeringandprice/costinput SOW/PWS Readthes olicitation,sectionB,andSOW/PWS Whatisbeingpurcha sed? NotaseasyaslookingattheSectionBCLINsand/orSLI Ns Whatarethesolicitationrequirementsforthecontract orandthegovernment?
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CostAnalysis:SecondStep Readthecontractor’sproposalprice/costnarrative Itwilldiscussthecontract or’sproposalstructure,assumptions,rationale,etc. Thelengthandqualitywillvary Animportantsource ofproposalinformation Study/knowtheproposalsetup Checkthemath: Isthearithmeticcorrect?TheSectionBunitpricesmultipliedbythequantitiesresulti nthetotalamounts? Dotheamounts“foot”?Dotheyaddupand/orcalculatecorrectly? Dothenumbers“track”?Canthefiguresbetracedamongthesupportsched ules? 17CostAnalysis:ThirdStep Whatisthebasisoftheproposedcost? Howdidyoucomeupwiththisnumber • ? Whatisyourrationale? Whatareyourassumptions? Whatarethecalculationsyouused? Thecontrac tor’sresponsesprovidetheanswertothequestion: Whyisthispriceand/orcostreasonable? 18CostEstimatingMethodsUsedbytheContractor Commonmethods: RoundTable:Expertsgettogeth • erandmakejudgmentsonprojectedcosts Comparison:Adjustmentsaremadetoapastorcurrentitemtod erivethecost Parametric:Projectionsarebasedonformulas,orcostestimatingrelationships Detailed:At horoughreviewismade,withdetailedinformationcomprisingtheestimateAnofferormayuseanygenerall yacceptedestimatingmethodsthatareequitableandconsistentlyappliedinsimilarsituations. 19BasicCostElementBreakdownProposedPriceByCostElementItem/Service:RFP:CLIN:SLIN:Date/Tim • e:4/21/200613:43FileName:BasePeriodCostElement:HoursRateBaseAmountMaterial:DirectMateria l100Scrap/Discount/Miscellaneous1%1001MaterialHandling2%1012TotalMaterial103DirectLabor:L aborCategory155.0025LaborCategory262.0012Total113.3637FringeBenefits3%371Overhead4%382 OtherDirectCosts(ODC's)Subcontracts100Travel50TotalODC's150Subtotal193G&AExpenses5%19310 TotalCosts202Profit1%2022UnitPrice204Quantity2TotalPrice409 •
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CostAnalysis:ThirdStep Whatisthebasisoftheproposedcost? Howdidyoucomeupwiththisnumber? Whatisyourrationale? Whatareyourassumptions? Whatarethecalculationsyouused? Thecontracto r’sresponsesprovidetheanswertothequestion: Whyisthispriceand/orcostreasonable? 18CostEstimatingMethodsUsedbytheContractor Commonmethods: RoundTable:Expertsgettogeth erandmakejudgmentsonprojectedcosts Comparison:Adjustmentsaremadetoapastorcurrentitemtod erivethecost Parametric:Projectionsarebasedonformulas,orcostestimatingrelationships Detailed:At horoughreviewismade,withdetailedinformationcomprisingtheestimateAnofferormayuseanygenerall yacceptedestimatingmethodsthatareequitableandconsistentlyappliedinsimilarsituations. 19BasicCostElementBreakdownProposedPriceByCostElementItem/Service:RFP:CLIN:SLIN:Date/Tim e:4/21/200613:43FileName:BasePeriodCostElement:HoursRateBaseAmountMaterial:DirectMateria l100Scrap/Discount/Miscellaneous1%1001MaterialHandling2%1012TotalMaterial103DirectLabor:L aborCategory155.0025LaborCategory262.0012Total113.3637FringeBenefits3%371Overhead4%382 OtherDirectCosts(ODC's)Subcontracts100Travel50TotalODC's150Subtotal193G&AExpenses5%19310 TotalCosts202Profit1%2022UnitPrice204Quantity2TotalPrice409
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