1. COST ANALYSIS VS. PRICE ANALYSIS Andrea ONeill Cost/Price Analyst 27 April 2011

2. Introduction Cost Analysis vs. Price Analysis 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 Intl Business; MA in Procurement & Acq Mgmt, August 2011 Webster CPA in State of CO

3. Agenda Cost Analysis vs. Price Analysis 3 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

4. Is this Important? Cost Analysis vs. Price Analysis 4 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.

5. Terminology/Definitions Cost Analysis vs. Price Analysis 5 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

6. Exceptions to Certified Cost or Pricing Data Cost Analysis vs. Price Analysis 6 Below Simplified Acquisition Threshold (currently $150,000) Adequate price competition Prices set by law or regulation Commercial Item Waiver Granted

7. Data Other than Certified Cost or Pricing Data Cost Analysis vs. Price Analysis 7 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.

8. Certified Cost or Pricing Data Cost Analysis vs. Price Analysis 8 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.

9. Proposal Analysis Cost Analysis vs. Price Analysis 9 Two types of proposal analysis can be used: price analysis or cost analysis. Which type should I use?

10. Proposal Analysis Cost Analysis vs. Price Analysis 10 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.

11. Proposal Analysis Cost Analysis vs. Price Analysis 11 Certified Cost/Pricing Data = Cost Analysis Data Other than C/P Data = Price Analysis

12. Price Analysis Techniques Cost Analysis vs. Price Analysis 12 Compare proposed prices for each offer received (competition determine reasonableness)* Compare to previous prices (historical)* Compute parametric estimating methods

13. Price Analysis Techniques Cost Analysis vs. Price Analysis 13 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.

14. Cost Analysis Techniques Cost Analysis vs. Price Analysis 14 When evaluating certified cost or pricing data: Reasonableness of proposed costs Projection of trends Reasonableness of parametric models Application of audited or negotiated rates

15. Cost Analysis Techniques Cost Analysis vs. Price Analysis 15 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 Governments request; IGCE; and Forecasts of planned expenditures.

16. Cost Analysis Techniques Cost Analysis vs. Price Analysis 16 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

17. Cost Analysis vs. Price Analysis 17 Cost Analysis ProposalPrice Analysis Proposal LaborLabor Price FringeTravel Price OverheadODC Price Subtotal LaborMaterials Price TravelTotal Price ODC Materials Subtotal (G&A Base) G&A Total Cost Profit/Fee Total Price Proposal Detail

18. Cost Realism (Price Realism) Cost Analysis vs. Price Analysis 18 Cost realism is the process of independently reviewing and evaluating specific elements of each offerors 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 offerors technical proposal.

19. QUESTION & ANSWERS