Cost and Price Analysis Flashcards

In a competitive sealed bid environment, which pricing method is most commonly used?

Answer: Firm-fixed-price

Firm-fixed-price contracts are preferred in competitive sealed bidding because they place maximum risk on the contractor and provide stable pricing for the government.

What does the term 'price reasonableness' mean in public procurement?

Answer: The price is fair to both the buyer and seller based on current market conditions

Price reasonableness means the price is fair and equitable to both parties given the circumstances, not necessarily the lowest possible price.

Which document provides the government's independent estimate of contract costs before solicitation?

Answer: Independent Government Cost Estimate (IGCE)

The Independent Government Cost Estimate (IGCE) is prepared before solicitation to establish a baseline for evaluating whether vendor prices are reasonable.

What is the difference between direct costs and indirect costs in a government contract?

Answer: Direct costs are specifically identified with a single contract; indirect costs benefit multiple contracts

Direct costs can be attributed to a specific contract (e.g., labor, materials), while indirect costs—like overhead and G&A—benefit multiple contracts and are allocated proportionally.

A public buyer is evaluating a sole-source proposal. Which analytical method is most appropriate?

Answer: Cost analysis of the vendor's detailed cost breakdown

Without competition to benchmark against, cost analysis of the vendor's detailed cost elements is the most rigorous method to determine price reasonableness.

What is 'profit' considered in the context of government cost analysis?

Answer: A negotiable element separate from cost that rewards contractor risk and performance

Profit is a negotiable element that compensates contractors for risk and investment; it is evaluated separately from costs using structured profit analysis tools.