CPCM Cost and Price Analysis 1 — Questions and Answers
Question 1: When is certified cost or pricing data required under the Truth in Negotiations Act (TINA)?
- For all government contracts regardless of value
- For negotiated contracts above the threshold (currently $2 million) unless an exception applies (Correct answer)
- Only for cost-reimbursement contracts
- Only when a contractor is a large business
Correct answer: For negotiated contracts above the threshold (currently $2 million) unless an exception applies
TINA (codified at 10 U.S.C. 2306a and 41 U.S.C. 3502) requires certified cost or pricing data for negotiated procurements exceeding the current threshold unless an exception such as adequate price competition applies.
Question 2: Price analysis differs from cost analysis in that price analysis:
- Evaluates each cost element individually using the contractor's data
- Compares offered prices to market benchmarks without examining underlying cost elements (Correct answer)
- Requires certified cost or pricing data in all cases
- Is only applicable to sole-source awards
Correct answer: Compares offered prices to market benchmarks without examining underlying cost elements
Price analysis examines the total price against market prices, historical awards, or catalog prices without decomposing individual cost elements.
Question 3: Which of the following costs is generally unallowable under FAR Part 31?
- Direct labor costs for work performed on the contract
- Interest and financing charges on contractor borrowing (Correct answer)
- Fringe benefits paid to employees working on government contracts
- Depreciation on equipment used for contract performance
Correct answer: Interest and financing charges on contractor borrowing
FAR 31.205-20 specifically lists interest and financing costs as unallowable because the government should not subsidize a contractor's capital structure decisions.
Question 4: The term 'allocable cost' under FAR 31.201-4 means the cost:
- Is reasonable in amount and nature
- Is permitted by the contract or applicable law
- Is assignable to one or more cost objectives in accordance with the relative benefits received (Correct answer)
- Does not exceed the contract ceiling
Correct answer: Is assignable to one or more cost objectives in accordance with the relative benefits received
Allocability requires a logical or causal relationship between the cost and the cost objective — the cost must benefit the contract to be charged to it.
Question 5: A should-cost analysis is performed by the government to:
- Determine the contractor's historical profit margins
- Identify opportunities for the contractor to reduce costs through improved efficiency and management (Correct answer)
- Calculate the fair market price for commercial off-the-shelf items
- Assess whether a contractor meets small business size standards
Correct answer: Identify opportunities for the contractor to reduce costs through improved efficiency and management
Should-cost analysis is a government review of the contractor's work and management practices to identify inefficiencies and estimate what the work should cost with proper performance.
Question 6: Defective pricing occurs when a contractor provides cost or pricing data that is:
- Higher than the market average
- Not current, accurate, or complete at the time of price agreement (Correct answer)
- Submitted without proper certification
- Based on historical costs more than three years old
Correct answer: Not current, accurate, or complete at the time of price agreement
Defective pricing under TINA means the data provided was inaccurate, incomplete, or not current as of the date of price agreement, giving the government the right to a price reduction.
CPCM Cost and Price Analysis 1
When is certified cost or pricing data required under the Truth in Negotiations Act (TINA)?