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Desparado

Price Realism - Is it a thing?

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I was reading this below and a thought came to me.

http://smallgovcon.com/gaobidprotests/price-reasonableness-vs-price-realism-the-gao-explains-the-difference/

I then did some cursory FAR research searching the term, "price realism" and found zero results.  Plenty about "cost realism" but no mention of "price realism".  Obviously it's a thing as you can see in the link as considered by GAO.

I'm just curious if anyone knows where the term came up and if it is rooted in policy somewhere that I just can't find.

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Cost realism analyses are supposed to be for cost-reimbursement contracts.  See FAR 15.404-1(d)(2).

But cost realism analyses can also be used for fixed price contracts.  See FAR 15.404-1(d)(3).  The FAR doesn't change "cost realism" to "price realism," but common practice has.  The GAO usage reflects the common practice.  It is interesting that these cost realism analyses for fixed-price contracts often involve no cost data at all.

The provision at FAR 52.222-46, Evaluation of Compensation for Professional Employees, has been interpreted by the GAO as requiring a realism analysis -- that analysis is limited to the amounts to be paid to professional employees.

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The earliest use of the phrase 'price realism' I found is 1978 in a GAO decision, so its been around while.  

 

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