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Cost analysis is appropriate when factors affecting the purchase will not ensure a reasonable price based on price analysis alone and/or the Postal Service needs an understanding of the cost buildup of the proposal to verify cost realism and reasonableness. Cost or pricing data must be obtained whenever price analysis is insufficient to determine reasonableness of price. Cost analysis should be limited to cost elements that need detailed analysis to protect the Postal Service’s interest. When a limited number of cost elements will provide a reasonable analysis, the CO should obtain only the data needed to support such an analysis. Cost analysis is generally most useful when purchasing nonstandard items and services.
Cost analysis involves, as appropriate:
- Verifying cost or pricing data and evaluating cost elements, including:
- The necessity for, and reasonableness of, proposed costs, including allowances for contingencies.
- Projecting the potential supplier’s cost trends on the basis of current and historical cost or pricing data.
- Performing a technical analysis of the estimated labor, material, tooling, and facilities required and the reasonableness of scrap and spoilage factors.
- Applying audited or negotiated indirect-cost rates and labor rates.
- Evaluating the effect of the supplier’s current practices on future costs — the purchase/SCM team must ensure that the effects of inefficient or uneconomical past practices are not projected into the future. In pricing production of recently developed, complex equipment, the purchase/SCM team should make a trend analysis of basic labor and materials, even in periods of relative price stability.
- Comparing costs proposed by the supplier for individual cost elements with:
- Analyzing supplier’s make-or-buy decisions in evaluating subcontract costs.
- Verifying that the supplier’s cost submissions are in accordance with the cost principles below.
- Reviewing submissions to ensure that data needed to make the supplier’s proposal accurate, complete, and current have been submitted or identified in writing. The CO must attempt to obtain such data if they are available. If data cannot be obtained satisfactorily, allowance for the incomplete data must be negotiated.
- Utilizing audit services through the Office of the Inspector General (OIG) to validated cost or pricing data. More information on obtaining audit services through the OIG can be found at www.oig.hhs.gov.
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