FCC Cost Realism & Price Analysis 2 — Questions and Answers
Question 1: Under FAR 15.404-1(d), when is a cost realism analysis REQUIRED?
- For all fixed-price contracts regardless of type
- For cost-reimbursement contracts to evaluate the realism of proposed costs (Correct answer)
- Only when the offeror is a small business
- Whenever the contract value exceeds the simplified acquisition threshold
Correct answer: For cost-reimbursement contracts to evaluate the realism of proposed costs
FAR 15.404-1(d) mandates cost realism analysis for cost-reimbursement contracts to determine whether proposed costs are realistic for the work to be performed.
Question 2: What does 'cost realism' specifically evaluate in a proposal?
- Whether proposed costs comply with CAS disclosure statements
- Whether proposed costs are realistic, reasonable, and reflect a clear understanding of the requirements (Correct answer)
- Whether the offeror's accounting system is DCAA-approved
- Whether proposed costs match the Independent Government Cost Estimate exactly
Correct answer: Whether proposed costs are realistic, reasonable, and reflect a clear understanding of the requirements
Cost realism analysis evaluates whether proposed costs are realistic for the work, reflect a clear understanding of requirements, and are consistent with the offeror's technical approach.
Question 3: A contracting officer may adjust an offeror's proposed costs upward during cost realism analysis for what purpose?
- To penalize unrealistically low bids
- To establish the probable cost for evaluation ranking purposes (Correct answer)
- To set the contract ceiling price
- To calculate the contract's profit/fee amount
Correct answer: To establish the probable cost for evaluation ranking purposes
Upward adjustments during cost realism create a 'most probable cost' used solely for evaluation ranking, not as the actual contract price.
Question 4: Which price analysis technique involves comparing proposed prices to previously established prices for the same or similar items?
- Parametric estimating
- Comparison with catalog or market prices
- Comparison with prior purchase prices (Correct answer)
- Should-cost analysis
Correct answer: Comparison with prior purchase prices
Comparing proposed prices to prior purchase prices is a primary price analysis technique under FAR 15.404-1(b)(2), used when historical pricing is available.
Question 5: When a contracting officer uses 'most probable cost' for cost-reimbursement contract evaluation, what happens to the offeror's original proposed price?
- It is replaced by the most probable cost as the binding contract ceiling
- The original proposed price remains the basis for the contract, while most probable cost is used only for evaluation ranking (Correct answer)
- It is averaged with the most probable cost for negotiation
- It is rejected and the offeror must resubmit
Correct answer: The original proposed price remains the basis for the contract, while most probable cost is used only for evaluation ranking
The most probable cost is an evaluation tool only; the actual contract is based on the offeror's proposed costs, subject to negotiation.
Question 6: What is a 'should-cost' review in the context of price and cost analysis?
- A DCAA audit of an offeror's incurred costs on prior contracts
- A government team analysis of what a product or service should cost using industrial engineering and accounting principles (Correct answer)
- A comparison of the offeror's price to the IGCE
- An assessment of whether the offeror's cost accounting practices comply with CAS
Correct answer: A government team analysis of what a product or service should cost using industrial engineering and accounting principles
A should-cost review uses government teams with engineering, accounting, and other expertise to independently determine what the work should cost, identifying potential savings.
Question 7: Under FAR 15.403-1, which of the following is a condition that allows a contracting officer to waive the requirement for certified cost or pricing data?
- When the offeror is a large business with an approved purchasing system
- When adequate price competition exists (Correct answer)
- When the contract value is below $2 million
- When the offeror has a DCAA-approved accounting system
Correct answer: When adequate price competition exists
Adequate price competition is one of the exceptions under FAR 15.403-1(b) that allows a contracting officer to waive the requirement for certified cost or pricing data.
FCC Cost Realism & Price Analysis 2
Under FAR 15.404-1(d), when is a cost realism analysis REQUIRED?