It is critical that you understand techniques and terms of cost
analysis. Terms that are important not only include cost
analysis, price analysis, and cost realism analysis, but also terms
such as direct costs, indirect costs, and other direct costs.
In addition, there are techniques with which you should be
familiar. These include the various price analysis techniques
,and procedures that help the government to ensure a fair and
reasonable price.
You may be responsible for selecting the techniques for
comparison that are used to verify that the overall price that is
offered is fair and reasonable. - (correct answer) In order to
develop a prenegotiation position, you will analyze contract
costs and price using contract analysis techniques.
Prenegotiation objectives establish the government's initial
negotiation position. The Contracting Officer establishes
prenegotiation objectives before the negotiation of any pricing
action.
Cost analysis is the review and evaluation of the separate cost
elements and proposed profit/fee of an offeror's certified cost
or pricing data or data other than certified cost or pricing data.
It is important to evaluate the separate cost elements and
proposed profit/fee to determine how the proposed costs
represent the cost of the contract, assuming reasonable
economy and efficiency. - (correct answer) Contracting
Officers are required to purchase supplies and services from
responsible sources at fair and reasonable prices. This
requirement is based on the three elements that form the
foundation of the government's pricing objective.
,Government Objective:
purchase at fair and reasonable price
price each contract separately
exclude contingencies - (correct answer) In contracting,
when you act as the government's buyer, your primary
objective is to acquire supplies and services from responsible
sources at fair and reasonable prices.
There are many methods for estimating costs in an equitable
and consistently applied way. Some cost estimating texts
identify ten or more! Some common methods are:
Round-table
Comparison
Detailed - (correct answer) Round Table
In a round table, experts are brought together to develop cost
estimates by exchanging views and making judgments based on
knowledge and experience. This method is most commonly
used when there is little or no cost experience or detailed
product information (e.g., specifications, drawings, or bills of
material).
, Comparison
With the comparison method, costs for a new item are
estimated using comparisons with the cost of completing
similar tasks under past or current contracts. Any differences
are isolated and cost elements applicable to the differences are
deleted from or added to experienced costs. Comparisons may
be made at the cost element level or total price level.
Adjustments may also be made for possible upward or
downward cost trends.
This method is most commonly used when specifications for
the item being estimated are similar to other items already
produced or currently in production and for which actual cost
experience is available. - (correct answer) Detailed
The detailed method is characterized by a thorough review of
all components, processes, and assemblies. It requires detailed
information to arrive at estimated costs and typically uses cost
data derived from the accounting system, statistical records,
and other sources.
This method is most commonly used when the required
information is available and future production potential
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