Price Analysis

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The purpose of this paper is to determine which price analysis method is best in the widest variety of situations. There are several possible methods for doing price analysis and it is possible that one or more of these methods may be used in a specific case. The methods are: comparison of proposed prices received in response to a solicitation, comparison to prior prices paid, comparison to prior quotes, comparison to prices paid for similar items, the application of rough yardsticks to highlight significant inconsistencies that warrant additional pricing inquiry, comparison of offers to published prices, and comparison with independent government estimates. Auxiliary methods for price analysis are value and visual analysis. The objective of a price analysis is to ensure that the final awarded price is fair and reasonable (Hearn, 2006). Murphy (2009) states that price analysis is defined in FAR 15.404-1(b)(1) as the “process of examining and evaluating a proposed price without evaluating its separate cost elements and proposed profit. Price analysis results in a firm-fixed-price or a fixed-price with economic adjustment contract. If the award is based on adequate competition the price analysis will be used to assess the reasonableness of each proposed price. The two preferred methods are comparison of proposed prices received in response to a solicitation and comparison of prior prices paid. However, a contracting officer may use any of the remaining methods if they determine that the competitive proposed prices or previous contract prices is not available or is insufficient to prove that the price is fair and reasonable (Murphy, 2009). The first preferred method, a comparison of proposed prices received in response to a solicitation, consists of comparing two or more prices that were bid with no advantage over the others to decide which are fair and reasonable. Comparing competitive bids is the best of all price analysis methods when conditions are right for...
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