Free FAR Cost Analysis & Pricing Techniques Questions and Answers

Question 1

What is the primary goal of cost analysis in government contracting?

Accepted Answer

To ensure cost element reasonableness

Answer

The primary goal of cost analysis is to examine the individual elements of a contractor's proposed cost to determine if they are reasonable, allocable, and allowable. This involves scrutinizing direct labor, direct materials, indirect costs, and profit to ensure they are justified and comply with applicable regulations. It helps the government understand the contractor's cost structure and negotiate a fair price based on verified components.

Question 2

Which pricing technique involves comparing proposed prices with previously paid prices for the same or similar items?

Accepted Answer

Historical price analysis

Answer

Historical price analysis involves comparing a proposed price with prices previously paid for the same or similar items by the government or other customers. This method is a form of price analysis that leverages past procurement data to assess the reasonableness of a current proposal. It is particularly useful when there is a history of acquiring the item or service, providing a strong benchmark for evaluation.

Question 3

Which is NOT a valid method of cost analysis?

Accepted Answer

Price negotiation

Answer

Cost analysis is a process of evaluating the individual cost elements of a proposal to determine their reasonableness, allocability, and allowability. Valid methods include comparing with historical data, technical analysis of labor hours, and auditing indirect costs. Price negotiation, while a crucial part of the procurement process, is the *outcome* or *process* of reaching an agreement on price, not a *method* of cost analysis itself.

Question 4

What is the purpose of a 'should-cost' review?

Accepted Answer

To identify reasonable contract cost

Answer

A 'should-cost' review is a detailed, independent analysis conducted by the government to determine what a contract *should* cost if the contractor were operating efficiently and effectively. It goes beyond simply verifying proposed costs by identifying potential cost savings, inefficiencies, and opportunities for improvement. The goal is to establish a realistic and achievable target cost for the contract, promoting efficiency and value for the government.

Question 5

Parametric estimating is best described as:

Accepted Answer

Statistical modeling

Answer

Parametric estimating relies on statistical relationships derived from historical data to predict costs or durations. It involves developing mathematical models that correlate project characteristics (parameters) with cost outcomes. This approach uses statistical techniques to establish these relationships and apply them to new projects, making it a form of statistical modeling rather than item-by-item pricing or depreciation methods.

FAR - Certified Cost or Pricing Data Specialist Practice Test

FAR - Certified Cost or Pricing Data Specialist Practice Test

Free FAR Cost Analysis & Pricing Techniques Questions and Answers