U.S. flag

An official website of the United States government

Dot gov

Official websites use .gov
A .gov website belongs to an official government organization in the United States.

Https

Secure .gov websites use HTTPS
A lock () or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Breadcrumb

  1. Home
  2. Price Analysis

Price Analysis

ACON 056
Alternate Definition

Price analysis is the process of examining and evaluating a proposed price without evaluating its separate cost elements or the proposed profit.

General Information

FAR 15.404-1(a)(1) requires the contracting officer determine that the price to be paid is fair and reasonable. The analytical techniques and procedures selected depend on the complexity and circumstances of each acquisition, including factors such as the solicitation method, the evaluation criteria stated in the solicitation, and the extent of competition.

 

Price analysis always involves some sort of comparison. The price analysis methods (or bases for comparison) listed in FAR 15.404-1(b)(2) include but are not limited to the following:

 

  1. Comparison of proposed prices received in response to the solicitation
  2. Comparison of proposed prices to historical prices paid, whether by the Government or other than the Government, for the same or similar items
  3. Use of parametric estimating methods/application of rough yardsticks (such as dollars per pound or per horsepower, or other units)
  4. Comparison with competitive published price lists
  5. Comparison of proposed prices with independent Government cost estimates
  6. Comparison of proposed prices with prices obtained through market research
  7. Analysis of data other than certified cost or pricing data provided by the offeror

 

The first two techniques are the preferred techniques. However, if the contracting officer determines that information on competitive proposed prices or previous contract prices is not available, or is insufficient to determine that the price is fair and reasonable, he/she may use any of the remaining techniques appropriate to the acquisition.

 

Because price analysis has a subjective element to it, the contracting officer must be satisfied that the price is fair and reasonable. The contract file must document the rationale used in making the pricing decision, and include the source and type of data used to support the determination.