Definition
Cost Analysis Government review of contractor cost elements to determine if proposed costs are reasonable.
Definition
Cost analysis is the review and evaluation of the separate cost elements and proposed profit or fee in an offeror's proposal to determine whether they are reasonable, allowable, and allocable. Cost analysis involves examining direct and indirect costs, evaluating cost estimating methodologies, comparing proposed costs to historical actuals and independent government estimates, and assessing profit/fee factors. Cost analysis is required when price analysis alone cannot determine reasonableness, typically for sole source contracts, contracts without adequate price competition, or cost-reimbursement contracts. FAR 15.404-1(c) specifies cost analysis techniques. DCAA often assists contracting officers with cost analysis through audit support.
Also Known As
- Cost Evaluation
- Cost Proposal Analysis
Examples
Common Mistakes to Avoid
- ✕Not providing sufficient cost detail and backup documentation
- ✕Using outdated rates or factors in cost proposals
- ✕Failing to explain significant variances from historical costs
Who Should Know This Term
Pricing analysts, contracts professionals, DCAA auditors, cost accountants
Official Source
FAR 15.404-1(c)
