COST AND PRICE ANALYSIS

Cost and price Analysis



Cost and price Analysis

How is price analysis defined?

According to Federal Acquisition Regulation (FAR), the price analysis is technique to compare the price of the product with others. Similarly, we can say that price analysis is set of activities through which we can evaluate and examine the proposed price with reference to its separate cost (Broome, 2008). Government can employ price analysis technique to establish reasonable and fair price of the product. Government can use this technique for:

(i) Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes price reasonableness.

(ii) Evaluation of formerly proposed prices and previous Government and commercial contract prices with existing proposed prices for the identical or similar items, if both the validity of the contrast and the reasonableness of the previous price(s) can be established.

What is Qualified Product List (QPL) and how is it used

The Qualified Products Lists (QPL) identifies the products that have been tested for conformance with the appropriate specification requirements.  There are many QPLs, also known as approved products lists.  The federal government maintains a list, while most states maintain their own qualified products list.  The approved products lists are valuable resources for contractors, manufacturers, and distributors.

Usage

Contractors

If Contractors are doing business with a government agency, it is Contractors' responsibility to verify that all good or services supplied on a job meet these requirements. If Contractors are doing business with an agency that does not maintain a QPL, then consult with the engineer or procurement agent about the job parameters.  Many times Contractor can refer to the federal standards and specifications (Flyvbjerg, 2002).

Manufacturers

If someone is a manufacturer, there are many advantages for being listed on your state's Qualified Products List.  To obtain information for QPL approval, visit your state website to download the evaluation package.  Each state that maintains an approved products list will also provide instructions for the application process and usually offers online assistance.  Also, remember to consider QPL approval for other states as well.

Distributors

The Qualified Products List is a valuable resource for distributors.  By identifying materials on the QPLs, you can expand the products you sell by selling in smaller quantities.  If your company can supply materials in demand quickly and in the needed quantity, then you do not need to compete on price with the manufacturer.  Use the commodity codes to search for products within an industry.  Manufacturers sell in bulk to government agencies; however they welcome businesses that can repackage their materials in smaller quantities.  Often small towns or counties will purchase these products from a distributor because the minimum order requirements suit their application and budget.  Contractors that have been awarded government contracts also purchase from approved products lists in smaller quantities.

What does the FAR mean by total cost?

The total cost of a contract is the sum of the allowable direct and indirect costs allocable to the contract, incurred or to be incurred, less any allocable credits, plus any allocable cost of money pursuant to ...