2-34.6 Cost Analysis

Cost analysis is appropriate when factors affecting the purchase will not ensure a reasonable price because price analysis or another technique deemed appropriate to the goods or services being purchased do not suffice, 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 before awarding a noncompetitive contract or modification whenever price analysis or another technique deemed appropriate to the goods or services being purchased is insufficient to determine reasonableness of price, and in certain circumstances suppliers are required to certify that the cost or pricing data they submit is accurate, complete, and current (see 2-34.14, Certification of Cost or Pricing Data). 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 contracting officer 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 the following:
• Actual costs previously incurred by the same supplier.
• Previous cost estimates from the supplier or from other suppliers for the same or similar items.
• Independent Postal Service cost estimates.
• 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 contracting officer 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 validate cost or pricing data. More information on obtaining audit services through the OIG can be found at http://blue.usps.gov/purchase/infrastructure/smi_audit_home.htm.