Transcript Cost and Price Analysis
COST ANALYSIS VS. PRICE ANALYSIS
Andrea O’Neill Cost/Price Analyst 27 April 2011
Introduction
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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) Profit / Fee Cost Analysis vs. Price Analysis
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Exceptions to Certified Cost or Pricing Data
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
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Data Other than Certified Cost or Pricing Data
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: 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
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Cost Analysis Proposal Labor Fringe Overhead Subtotal Labor Travel ODC Materials Subtotal (G&A Base) G&A Total Cost Profit/Fee Total Price
Proposal Detail
Price Analysis Proposal Labor Price Travel Price ODC Price Materials Price 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