Jump to content


Photo

Difference b/w Cost Realism v. Price Realism


  • Please log in to reply
3 replies to this topic

#1 govt2310

govt2310

    Bronze Member

  • Members
  • PipPipPip
  • 220 posts
  • Gender:Not Telling

Posted 09 March 2011 - 12:27 PM

Is there any difference between a Cost Realism Analysis and a Price Realism Analysis? I ask because the term "Price Realism" does not appear in the FAR anywhere (did I miss it? Please point it out to me). All I can find in the FAR are these sections:

FAR 15.404-1(B), Price Analysis

FAR 15.404-1©, Cost Analysis

FAR 15.404-1(d) Cost realism analysis

If Price Realism Analysis is different than Cost Realism Analysis, why doesn't the FAR address it/define it? Can anyone tell me what the difference is? I have already looked at http://www.wifcon.com/pd15_404.htm and all I can tell is that GAO has used the term "price realism" analysis but none of these cases define what a price realism analysis is.

#2 Jacques

Jacques

    Silver Member

  • Members
  • PipPipPipPip
  • 290 posts
  • Gender:Male

Posted 09 March 2011 - 05:09 PM

Is there any difference between a Cost Realism Analysis and a Price Realism Analysis?... Can anyone tell me what the difference is?


If a solicitation so provides, price realism analysis can be conducted on fixed priced contracts to ensure that the contractor understands the requirements and is not proposing an excessively risky approach. As its name suggests, it involves using price analysis techniques (see FAR 15.404-1(b)) to determine whether the proposed price is unrealistically low.

Cost realism is defined adequately at FAR 15.404-1(d) and is required for and generally limited to cost reimbursement contracts, though in exceptional cases can be applied elsewhere (see FAR 15.305(a)(1)).

#3 Don Mansfield

Don Mansfield

    Platinum Member

  • Members
  • PipPipPipPipPipPip
  • 1,288 posts
  • Gender:Male
  • Location:San Diego, CA

Posted 09 March 2011 - 05:25 PM

Is there any difference between a Cost Realism Analysis and a Price Realism Analysis? I ask because the term "Price Realism" does not appear in the FAR anywhere (did I miss it? Please point it out to me). All I can find in the FAR are these sections:

FAR 15.404-1(B), Price Analysis

FAR 15.404-1?, Cost Analysis

FAR 15.404-1(d) Cost realism analysis

If Price Realism Analysis is different than Cost Realism Analysis, why doesn't the FAR address it/define it? Can anyone tell me what the difference is? I have already looked at http://www.wifcon.com/pd15_404.htm and all I can tell is that GAO has used the term "price realism" analysis but none of these cases define what a price realism analysis is.

The FAR uses the term "cost realism analysis" to describe both. FAR 15.404-1(d)(3) describes what the GAO refers to as "price realism analysis."

Cost realism analyses may also be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price-type contracts when new requirements may not be fully understood by competing offerors, there are quality concerns, or past experience indicates that contractors? proposed costs have resulted in quality or service shortfalls. Results of the analysis may be used in performance risk assessments and responsibility determinations. However, proposals shall be evaluated using the criteria in the solicitation, and the offered prices shall not be adjusted as a result of the analysis.



#4 Vern Edwards

Vern Edwards

    Platinum Member

  • Members
  • PipPipPipPipPipPip
  • 4,591 posts
  • Gender:Male
  • Location:Portland, Oregon

Posted 09 March 2011 - 05:36 PM

Here is another explanation from the GAO:

Agencies are only required to perform a cost realism analysis when the solicitation anticipates the award of a cost-reimbursement contract. In contrast, where an RFP contemplates the award of a fixed-price contract, or a fixed-price portion of a contract, an agency may, as here, provide in the solicitation for the use of a price realism analysis for the limited purpose of measuring an offeror's understanding of the requirements or to assess the risk inherent in an offeror's proposal or quote. Puglia Eng'g of California, Inc., B?297413 et al., Jan. 20, 2006, 2006 CPD para. 33 at 6. Although the FAR does not use the term ?price realism,? it states that cost realism analysis may be used to evaluate fixed-price proposals for purposes of assessing proposal risk, but not for the purpose of adjusting an offeror's evaluated price. FAR sect. 15.404?1(d)(3); see also IBM Corp., B?299504, B?299504.2, June 4, 2007, 2008 CPD para. 64 at 11.

* * *

[A] price realism evaluation is conducted for the purpose of measuring a vendor's understanding of the contract requirements or to assess the risk inherent in a vendor's proposal or quote-not for the purpose of determining the probable cost to the government. Id. Moreover, a price realism analysis does not permit the agency to adjust a vendor's quoted price based on the results of the analysis-which is essentially what the protester contends the agency should have done here in evaluating probable cost to the government. FAR sect. 15.404?1(d)(3). On this record, we find no basis to sustain the protest.

[Italics added.]

Ball Aerospace & Technologies Corp., B-402148, 2010 CPD ? 37.




0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users