2-7.1 When to Conduct

A should-cost analysis can be complex and time consuming. It can be conducted for large programs or individual projects and can result in substantial savings to the Postal Service. The following circumstances are conducive to conducting a should-cost analysis:

• Client or purchase/SCM team has little or no previous knowledge of costs.
• Inadequate competition in the marketplace.
• Price analysis cannot determine whether a supplier’s price is fair and reasonable.
• Item acquired has a history of increasing costs.
• The purchase is at the point in the supply chain process when it is defined and major changes are unlikely.
• Sufficient time and personnel are available to conduct the analysis.
• Objective of driving cost reductions in the early stages of new product development by challenging requirements, specifications, and services.
• Current contracts with suppliers where any of the above criteria is met.