2-34.3 Comparison with Historical Prices

This price analysis technique involves comparing previously proposed and contract prices with current proposed prices for the same/similar items in comparable quantities. The pricing analyst should ensure that historical prices are still reasonable in the marketplace and serve as a valid basis for comparison. Just because a historical price exists does not mean that it is valid for comparison purposes. The following considerations apply to comparison with historical prices:

• How has the state of the market and competition changed?
• What are the fixed costs of the original prices that may no longer apply to the current purchase?
• How has inflation and/or deflation affected the price?
• Have the supplier’s sources, quantities, production, start-up costs, or terms of purchase changed?
• What was the market demand/supply for the item/service at the time of previous purchase?
• Is the commercial item used for comparison similar?
• Was the historic purchase conducted as noncompetitive or competitive?
• Did the price include additional services?

The pricing analyst must adjust the historical price accordingly so that a direct comparison can be made with the proposed price.