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Cost and Price Analysis

Cost and Price Analysis for Government Contracts

Federal Acquisition Regulation 15.402 requires government contracting officers to purchase supplies and services from “responsible sources at fair and reasonable prices.”

Contracting officers use cost analysis and price analysis to determine that prices are fair and reasonable. The method and extent of the analysis depends on several factors, including the dollar value and urgency of the contract.

For many contracts, price analysis will establish that prices are fair and reasonable. Informal price analysis must be performed on all procurements over $3,000. Contracts over $30,000 require formal, written price analysis.

If price analysis and negotiation fail to achieve fair and reasonable prices, cost analysis with documentation of expenses may be required. Contracts over $700,000 also trigger cost analysis requirements of The Truthful Cost or Pricing Data Act (often referred to by its historical name, the Truth in Negotiations Act or TINA).


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Federal Acquisition Regulation 15.402 requires government contracting officers to purchase supplies and services from “responsible sources at fair and reasonable prices.”

Contracting officers use cost analysis and price analysis to determine that prices are fair and reasonable. The method and extent of the analysis depends on several factors, including the dollar value and urgency of the contract.

For many contracts, price analysis will establish that prices are fair and reasonable. Informal price analysis must be performed on all procurements over $3,000. Contracts over $30,000 require formal, written price analysis.

If price analysis and negotiation fail to achieve fair and reasonable prices, cost analysis with documentation of expenses may be required. Contracts over $700,000 also trigger cost analysis requirements of The Truthful Cost or Pricing Data Act (often referred to by its historical name, the Truth in Negotiations Act or TINA).


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