PAP.2.7.010 Cost or Price Analysis

(a) A cost or price analysis shall be performed for all procurement actions (including contract modifications). The degree of analysis shall depend on the facts surrounding each procurement. The method of analysis shall be determined based on the criteria listed below.

(1) Submission of Cost or Pricing Information.

(A) A cost analysis will be necessary when adequate price competition is lacking, and for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public or based on prices set by law or regulation. A price analysis will be used in all other instances to determine the reasonableness of the proposed contract price.

(B) The CPO or designee will negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed. To establish a fair and reasonable profit, consideration will be given to the complexity of the work to be performed, the risk borne by the contractor, the contractor's investment, the amount of subcontracting, the quality of its record of past performance, and industry profit rates in the surrounding geographical area for similar work.

(C) Costs or prices based on estimated costs for contracts under grants will be allowable only to the extent that costs incurred or cost estimates included in negotiated prices are consistent with Federal cost principles. Grantees may reference their own cost principles that comply with the applicable Federal cost principles.

(2) The cost-plus a percentage of cost and percentage of construction cost methods of contracting shall not be used.

(3) A comparison of prices shall be used in all cases other than those described in cost analysis above.