Cost & Price Analysis for Government Contracts

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

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

For many contracts, price analysis will establish fair and reasonable prices. 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. The threshold for obtaining certified cost or pricing data under the requirements of The Truthful Cost or Pricing Data Act (often referred to by its historical name, the Truth in Negotiations Act or TINA) is $750,000 for prime contracts awarded before July 1, 2018, and $2 million for prime contracts awarded on or after July 1, 2018.

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