Cost and Price Analysis Flashcards

What is the primary purpose of price analysis in public procurement?

Answer: To determine if a proposed price is fair and reasonable without examining cost elements

Price analysis evaluates the overall proposed price against benchmarks like market prices or historical data without breaking down individual cost elements.

Which of the following is a cost analysis technique used by public buyers?

Answer: Reviewing direct labor, materials, overhead, and profit components individually

Cost analysis involves examining each cost element—direct labor, materials, overhead, and profit—to determine if each is allowable, allocable, and reasonable.

Under the Federal Acquisition Regulation (FAR), when is certified cost or pricing data required?

Answer: When a contract is expected to exceed the threshold set by law and no exceptions apply

Certified cost or pricing data is required for negotiated contracts exceeding the statutory threshold (currently $2 million) unless an exception such as adequate price competition applies.

What does the term 'should-cost analysis' refer to in public procurement?

Answer: An analysis determining what a product should cost based on efficient performance

Should-cost analysis estimates what a product or service should cost assuming efficient contractor performance, helping buyers identify areas for cost reduction.

Which cost is considered 'unallowable' under federal cost principles?

Answer: Entertainment expenses charged to a government contract

Entertainment costs are specifically listed as unallowable under FAR Part 31 because they do not constitute a legitimate cost of government contract performance.

What is a 'fully loaded labor rate' in cost analysis?

Answer: The direct labor rate plus fringe benefits, overhead, and general and administrative costs

A fully loaded labor rate includes the base wage plus all associated indirect costs such as fringe benefits, overhead, and G&A, representing the true cost to the government.