Definition
Price Analysis Evaluation of proposed prices compared to benchmarks to determine reasonableness.
Definition
Price analysis is the process of examining and evaluating a proposed price without evaluating its separate cost elements and profit. Price analysis techniques include comparing proposed prices to competition, historical prices, published price lists, independent government estimates, and market prices for similar items. FAR 15.404-1(b) identifies specific price analysis techniques. Price analysis is the preferred method when adequate price competition exists, as competitive prices generally reflect fair market value. When price analysis cannot determine reasonableness (such as sole source situations), cost analysis is required. Price analysis is generally simpler and faster than cost analysis but may not be sufficient for complex or unique requirements.
Also Known As
- Price Evaluation
- Price Reasonableness Analysis
Examples
Common Mistakes to Avoid
- ✕Relying solely on price analysis when competition is inadequate
- ✕Not documenting basis for price reasonableness determination
- ✕Comparing prices without adjusting for quantity, terms, or scope differences
Who Should Know This Term
Contracting officers, pricing analysts, contracts professionals
Official Source
FAR 15.404-1(b)
