Pricing Strategy and Cost Volume Development Flashcards

What is the primary purpose of the cost/price volume in a government proposal?

Answer: To provide a detailed, auditable breakdown of proposed costs that allows the government to evaluate reasonableness and realism

The cost volume must demonstrate that proposed costs are reasonable, allowable, and consistent with the technical approach described in other volumes.

What does 'cost realism' mean in the context of government proposal evaluation?

Answer: Whether the proposed costs accurately reflect the true cost of performing the work as proposed

Cost realism analysis determines if costs are too low to actually perform the work, which could indicate an unrealistic or risky offer.

What are 'indirect costs' in a government proposal context?

Answer: Costs not directly tied to a specific contract but allocated across multiple projects, such as overhead and G&A

Indirect costs like overhead, fringe benefits, and G&A are allocated to contracts through approved rates and must be disclosed in cost proposals.

What is the role of DCAA (Defense Contract Audit Agency) in the context of proposal pricing?

Answer: To audit contractor accounting systems and proposed costs for adequacy and compliance with federal regulations

DCAA audits help the government determine if a contractor's accounting practices and proposed costs are reliable and allowable under FAR.

What is a 'basis of estimate' (BOE) in cost proposal development?

Answer: A documented explanation of how labor hours, materials, and costs were estimated for each cost element

A BOE provides the rationale and methodology behind every cost estimate, giving the government confidence in the proposal's accuracy.

Why is it important to align the cost volume with the technical and management volumes?

Answer: Inconsistencies between volumes raise evaluator concerns about the offeror's understanding of the work

If the technical volume describes work that is not reflected in the cost estimate, evaluators may conclude the team does not understand the full scope.