Government Procurement Certification Cost & Price Analysis 2 — Questions and Answers
Question 1: When evaluating a cost-plus-fixed-fee (CPFF) contract proposal, which element directly affects the government's maximum liability?
- The contractor's proposed profit percentage
- The estimated cost and the fixed fee together form the ceiling obligation
- Only the fixed fee, since costs are reimbursed as incurred
- The contract's Limitation of Cost clause ceiling (Correct answer)
Correct answer: The contract's Limitation of Cost clause ceiling
Under FAR 52.232-20, the Limitation of Cost clause establishes the maximum amount the government is obligated to reimburse; the contractor must notify the government when costs approach this ceiling.
Question 2: A contracting officer wants to establish pre-negotiation objectives for a major negotiated acquisition. What is the primary purpose of the pre-negotiation memorandum (PNM)?
- To document the final negotiated price for the contract file
- To record the contracting officer's cost and price analysis and establish an objective price range before negotiations begin (Correct answer)
- To obtain approval from the SBA before entering negotiations with a small business
- To notify the contractor of the government's maximum budget for the acquisition
Correct answer: To record the contracting officer's cost and price analysis and establish an objective price range before negotiations begin
A pre-negotiation memorandum documents the contracting officer's analysis of the contractor's proposal and establishes the government's negotiation objectives, including the objective price, before the negotiation session begins.
Question 3: Which of the following best describes 'should-cost analysis' in government procurement?
- A standard price analysis technique used for all commercial item purchases
- An in-depth review of a contractor's costs to identify inefficiencies and determine what the contract should cost if performed efficiently (Correct answer)
- A method to calculate profit using the weighted guidelines approach
- A DCAA audit procedure required for all contracts over $10 million
Correct answer: An in-depth review of a contractor's costs to identify inefficiencies and determine what the contract should cost if performed efficiently
Should-cost analysis (FAR 15.407-4) is a government team review of a contractor's operations to identify uneconomical practices and quantify potential savings, resulting in a price reflecting efficient performance.
Question 4: Under FAR 15.404-4, which factor is given the most weight when using the weighted guidelines method to determine profit or fee?
- Contractor facilities capital employed
- Performance risk (technical and management) (Correct answer)
- Cost efficiency
- Contract type risk
Correct answer: Performance risk (technical and management)
The weighted guidelines method assigns the highest weight range to performance risk factors (technical and management), reflecting the contractor's effort, complexity, and the risk assumed in executing the contract.
Question 5: A contractor submits an invoice for costs incurred on a cost-reimbursement contract. The contracting officer's representative (COR) notices the contractor billed for first-class airfare for key personnel. What is the correct action?
- Approve the invoice since senior personnel are entitled to first-class travel on government contracts
- Disallow the excess cost above coach/economy airfare under FAR 31.205-46 (Correct answer)
- Refer the matter to DCAA for a full audit before taking action
- Reduce total travel costs by 25% as a standard adjustment
Correct answer: Disallow the excess cost above coach/economy airfare under FAR 31.205-46
FAR 31.205-46 limits allowable air travel costs to the lowest available coach/economy fares; costs in excess of that standard are unallowable and should be disallowed on the invoice.
Question 6: What is the key distinction between a 'firm-fixed-price' contract and a 'fixed-price with economic price adjustment' contract?
- A firm-fixed-price contract allows cost audits; fixed-price with EPA does not
- A fixed-price with EPA contract includes provisions to adjust the price based on specified contingencies such as labor or material cost changes (Correct answer)
- A firm-fixed-price contract is only used for commercial items
- Fixed-price with EPA requires submission of certified cost or pricing data
Correct answer: A fixed-price with EPA contract includes provisions to adjust the price based on specified contingencies such as labor or material cost changes
A fixed-price with economic price adjustment (EPA) contract includes a price adjustment clause tied to specific economic indicators or actual costs (e.g., PPI, labor rates) to protect both parties from significant market fluctuations over the contract period.
Question 7: Which statement about the relationship between cost analysis and price analysis is most accurate?
- Cost analysis and price analysis are interchangeable terms for the same process
- Price analysis is used when cost or pricing data is required; cost analysis is used otherwise
- Cost analysis examines individual cost elements while price analysis evaluates the overall price without examining cost components (Correct answer)
- Cost analysis is only required for sole-source contracts over $10 million
Correct answer: Cost analysis examines individual cost elements while price analysis evaluates the overall price without examining cost components
Cost analysis (FAR 15.404-1(c)) involves evaluating individual cost elements, labor, materials, overhead, and profit, while price analysis (FAR 15.404-1(b)) evaluates the total proposed price using comparison methods without examining underlying cost components.
Government Procurement Certification Cost & Price Analysis 2
When evaluating a cost-plus-fixed-fee (CPFF) contract proposal, which element directly affects the government's maximum liability?