Peer replies should be 260 words each, include at least 1 direct question and ad value to the discussion.

I’m studying for my Business class and need an explanation.

STUDENT 1 (Joan):

When determining fair and reasonable prices from a contractor, the Contracting officer weighs the data by utilizing price and cost analysis. The method and detail of the analysis depends on the immediate need of the contract and the overall price of the contract. The Federal Acquisition Regulation 15.402, provides the requirement for contracting officers to purchase goods & services from a “responsible source at a fair and reasonable prices” (2020).

In some purchases, price analysis should be sufficient; in others, a price analysis will be utilized to corroborate the conclusions arrived at through a cost analysis. A price analysis is the process of deciding if the asking price is reasonable. Essentially, it is comparing the price with known indicators of reasonableness. Examples of techniques that can be utilized to conduct a price analysis is (pg. 170):

– Comparisons with GSA prices

– Analysis of historical prices paid in previous contracts

– Comparison of published price lists from various vendors

For example, if the Contracting Officer was looking at a contract to procure medical masks. They would look at established prices in the market because adequate price competition exists.

In the event price reasonableness cannot be determined in a price analysis then a cost analysis will be completed. For instance, if a buyer wanted to procure a medical shelter to protect medical personnel while conducting COVID test, they would conduct a cost analysis. This is because the requirement is unique in nature and competition does not exist in the commercial marketplace. Moreover, a cost analysis determines price reasonableness by evaluating estimated or actual cost for the performance to determine the probable cost and proposed profit to the contractor. A cost analysis can be accomplished by the following methods (pg.170):

-Trend analysis

– Make versus Buy

– Historical data for similar work

-Vendor quotes and historical data on purchase history

References:

NCMA. (2013). Contract Management Body of Knowledge (CMBOK), 4th edition. NCMA.

Cost & Price Analysis for Government Contracts – Left Brain Pro. (2020). Retrieved 9 July 2020, from https://www.leftbrainpro.com/resources/cost-price-analysis/#:~:text=Contracting%20officers%20use%20cost%20analysis,prices%20are%20fair%20and%20reasonable.

STUDENT 2 (Jeremy):

Hello Everyone

I hope this week has gone well for everyone, things have gotten interesting here none the less, but this week we are looking into the importance of cost/price analysis. In addition to explaining the significance of fair/reasonable prices for analysis, negotiation phases, each of these offers clear application and interpretation.

Forum Question:

  1. What is the difference between cost and price analysis and when would you use the two when analyzing a contractor’s proposal?

As we understand from CMBOK Cost is “1. The amount of money expended in acquiring a product or obtaining a service. 2. The total of acquisition costs plus all expenses related to operating and maintaining an item once acquired” (p.155).

Additionally, price is “1. A monetary unit given, received, or asked for in exchange for supplies or services. 2. The amount of money or equivalent paid or charged for supplies or services, including cost and profit or fee. 3. Cost plus any fee or profit applicable to the contract type” (p. 178).

Cost and price analysis enable the contract officer (CO) or contract auditor (CA) more clarity in how to effective the contracts projections would or could be. They also produce the best results when applying them to a strategic sourcing contract or scenario.

  1. Explain the significance of determining fair and reasonable prices during analysis and negotiation phases; use a contract example.

This is the article I found that best described the impact, and significance of fair and reasonable prices during analysis: https://www.crn.com/columns/channel-programs/24015…

I chose this article because I was unable to find a contract that fit what I thought would be most effective for this subject matter. The ability of requesting the fair and reasonable analysis from the contractor in order to determine the truthfulness of the contractor and the most reasonable cost to the government. This also covers the CO and the contractor if there is a possible protest to the contract award. The need for clarity and transparency is the key for government contracting, it keeps each person, company, and even agency in the clear.

Jeremy W

References

Charles, S. (2013). Selling to the Government: What ‘Fair and Reasonable Pricing’ Means. Retrieved from https://www.crn.com/columns/channel-programs/24015…

NCMA. (2013). Contract Management Body of Knowledge (CMBOK), 4th edition. NCMA.

STUDENT 3 (Zabi):

Hello Everyone,

I hope you’re doing well! I found this week’s topic interesting. Cost and pricing analysis are a complex process during the bid’s evaluation process. The government acquisition experts don’t determine the cost or price of products required, but they do conduct market research or survey to justify the cost and price reasonableness during the evaluation process.

1. What is the difference between cost and price analysis and when would you use the two when analyzing a contractor’s proposal?

Cost and price analyses are two interdependent methods of projecting project and program costs. Price analysis looks purely at the unit price from a contractor. It means cost plus any fee or profit applicable to the contract. According to CMBOK, price analysis “Evaluates an offer by comparing it with indications of reasonableness. Primary comparisons include competitive analysis and published prices” (p. 179). While cost analysis incorporates the reasonable cost to the contract or producing the item to determine the fairness and appropriateness of the price quoted. Government contract experts looks at the individual elements of the price during cost analysis. For example, labor rates, direct and indirect materials, and overhead, G&A expenses, profit/fee. During the award process, the acquisition experts receive several cost proposals bids for review and evaluation. They evaluate cost and pricing to determine whose price is reasonable, the best value, and to the best interest of the government and people’s tax money.

2. Explain the significance of determining fair and reasonable prices during analysis and negotiation phases; use a contract example.

To determine fair and reasonable prices during the analysis and negations phases, the evaluation committee experts must have knowledge and experience of the field. Market research is one method to make multiple comparisons in determining price reasonableness. Also, adequate price competition is considered one of the best bases for price analysis. The contract cost proposal includes estimates of costs and a budget narrative explaining the best value explanation and how these costs were driven. In a recent proposal for an education project in South Sudan, we focused on the best value analysis, major assumption, and narrative of cost categories will help the government evaluation team determine if the proposed costs are fair and reasonable.

NCMA. (2013). Contract Management Body of Knowledge (CMBOK), 4th edition. NCMA.

https://www.purchasing-procurement-center.com/cost-and-price-analysis.html

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