Price and cost realism analyses are evaluation processes to determine price validity and the most realistic price that the Government will pay for goods and services.  This workshop features an in-depth explanation of how price and cost analysis techniques apply and impact the preparation, pricing, and evaluation of contract cost proposals.  Coverage will focus on the pinch points in the process – those areas of significant and continuing controversy.  Participant involvement and questions will also drive the discussion. 

The increasing importance of price and cost challenges to contract awards and how to manage and minimize protest risks will also be covered.  The workshop starts with definitions from the rules, regulations, case decisions, and available guidance. 

Price Analysis

• Price Analysis is the process of examining and evaluating a proposal price without evaluating its separate cost elements and proposed profit. 
• Price Analysis should be used to verify that the overall price offered is fair and reasonable. 
• Price Analysis shall be used when cost or pricing data are not required. 
• A Price Reasonableness Analysis is intended to prevent the government from paying too much for contract work. 
• The purpose of a Price Realism Analysis has been described as a verification that the offeror’s price is not overly optimistic and impractically low. 
• A Price Realism Analysis examines the performance risk of proposals in a fixed-price contract procurement, with particular attention to the risk of low-priced proposals, and may include cost realism analysis.
• A Price Realism Analysis will be applied in order to measure the offeror’s understanding of the requirements and/or to assess the risk inherent in an offeror’s proposal.
• A Price Realism Analysis is intended to determine if the contractor is proposing a price so low that the performance of the contract will be at risk. 

Cost Analysis

• Cost Realism Analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposal cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the technical proposal. 
• Cost Realism Analysis may also be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price type contracts when new requirements may not be fully understood by competing offerors, there are quality concerns, or past experience indicates that contractors proposed costs have resulted in quality or service shortfalls.  Results of the analysis may be used in performance risk assessments and responsibility determinations.  However, proposals shall be evaluated using the criteria in the solicitation, and the offered prices shall not be adjusted as a result of the analysis.
• Cost Realism Analysis shall be performed on cost-reimbursement contracts to determine the probable cost of performance for each offeror. 
• Cost Reasonableness and Cost Realism are distinguishable, but both of these analytical frameworks critically examine the cost elements of a price proposal.
• Cost Analysis shall be used to evaluate the reasonableness of individual cost elements when cost or pricing data are required. 
• Cost Analysis may also be used to evaluate information other than cost or pricing data to determine Cost Reasonableness or Cost Realism.

Proposal Analysis
The objective of Proposal Analysis is to ensure that the final agreed-to price is fair and reasonable. 

Main Topics Covered:

• A comprehensive approach to the new cost-competitive environment in Government Contracting
• How cost and price analysis is used to determine realistic prices and costs in Government Contracting
• How Contractor and Government professionals can prepare and support cost and price proposal decisions
• How Contractor and Government professionals manage challenges in cost and price analysis

Learning Objectives: 
After completing this course, you will be able to:

• Understand Cost Estimating and Pricing practices
• Recognize cost reimbursement and fixed price contract differences
• Determine commercial items vs non-commercial items
• Understand overhead pools and establish overhead rates
• How to properly use data for an estimate base
• Analyze and use different cost estimating techniques 

Questions are encouraged and the materials and resources provided will help participants to meet the new and continuing challenges in cost and price analysis in the new competitive environment of contracting.