I'm not addressing the legality of anything here, just floating a trail ballon. The cost realism analysis seems like a thin reed which is required to support a whole lot of weight.
They require a lot of knowledge from the Project Management side as to exactly how the Contractor will perform the work;
They are very subjective; and
Are therefore susceptible to pressure from within and without the contracting office; and
They are performed for requirements which, by their nature, are difficult to get a handle on (hence the CPFF contract type).
I'm sure there are many good cost realism analyses floating around, just worrying they are outnumbered by the bad ones. *In particular* Steward's are probably quite good since he has a track record of avoiding overruns, but the tool *in general* doesn't fill me with confidence about mitigating the moral hazard issues Vern raises.
Also, sorry for the premature posting- still getting used to the forum. Thanks!