Cost Realism & Price Analysis Flashcards
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Read the first 7 Cost Realism & Price Analysis flashcards as text
Under FAR 15.404-1(b), which is the PREFERRED price analysis technique when adequate price competition exists?
Answer: Comparison of proposed prices received in response to the solicitation
When two or more responsible offerors independently compete, comparing those prices is the preferred and most reliable price analysis technique per FAR 15.404-1(b)(1).
A contracting officer determines that a sole-source offeror's proposed G&A rate of 8% is unrealistic given that the offeror's disclosed rate is 22%. What action is appropriate?
Answer: Use the 22% disclosed rate to establish the most probable cost for evaluation and negotiation
A proposed G&A significantly below the disclosed/historical rate signals unrealistic pricing; the CO should use realistic rates to establish most probable cost and as a basis for negotiation.
Which term describes a cost that is specifically excluded from reimbursement under a government contract by FAR Part 31?
Answer: Unallowable cost
Unallowable costs are those explicitly disallowed by FAR 31.205 (e.g., entertainment, lobbying, certain legal costs) and cannot be billed to or reimbursed under government contracts.
When performing cost analysis, what is the purpose of evaluating 'cost allocability'?
Answer: To determine whether a cost can be assigned to a specific contract or cost objective based on the benefit it provides
Cost allocability under FAR 31.201-4 requires that a cost be assignable to a contract in accordance with the relative benefits received or other equitable relationship.
What is a 'most probable cost' estimate, and how does it differ from the proposed cost?
Answer: It is the government's upward or downward adjustment of proposed costs to reflect realistic probable performance costs, used only for evaluation ranking
Most probable cost is the government's adjusted estimate of what a contract will likely cost based on realism analysis, used to rank offerors fairly regardless of unrealistically low bids.
Under FAR 15.403-3, what is 'other than certified cost or pricing data' and when is it used?
Answer: It is factual information (e.g., sales data, catalog prices, market data) used to support price reasonableness when certified data is not required
Other than certified cost or pricing data includes factual, verifiable information like catalog prices, sales data, and historical quotes used when TINA thresholds or exceptions apply.
A contracting officer is evaluating two cost-reimbursement proposals: Firm A proposes $5M and Firm B proposes $3.5M. After cost realism analysis, the CO adjusts Firm B's costs upward to $5.2M. What does this mean for source selection?
Answer: Firm B's most probable cost of $5.2M is used for evaluation ranking, potentially ranking Firm A higher on cost despite Firm B's lower proposal
The most probable cost adjustment means Firm B's realistic cost to the government is higher than Firm A's, so Firm A may rank higher on cost factor even though Firm B proposed less.