The process of examining and evaluating a proposed price without evaluating its separate cost elements is known as what?

The process of examining and evaluating a proposed price without delving into its separate cost elements is known as price analysis. This method focuses on assessing whether the proposed price is fair and reasonable based primarily on the market conditions and prices of similar goods or services rather than breaking down the individual components that make up the total price.

Price analysis is particularly useful when the objective is to ensure that the price offered by the contractor aligns with what is prevalent in the market, allowing for comparisons across different bids. This process can involve techniques such as comparing prices with prior purchases, reviewing published price lists, or analyzing competitive offers. It does not require an in-depth understanding of the cost structures of the offered items, making it distinct from cost analysis, which would involve a detailed examination of the underlying cost elements to derive the price.

Understanding price analysis is crucial for federal contract managers as it helps ensure that the government is making financially sound decisions without needing to assess the complexities of the costs involved in getting to that price point.