9.2 Price or cost analysis requirement

9.2.3 Cost analysis

Cost analysis should be performed in situations where price analysis does not yield a fair and reasonable price. The goal of cost analysis is to determine whether the supplier's costs are in line with what reasonably economical and efficient performance should cost. Cost or pricing data provided by the supplier is the means for conducting cost analysis and provides factual information about the costs that the supplier says may be incurred in performing the contract. Cost analysis techniques are used to break down a supplier's cost or pricing data to verify and evaluate each component. Some of the cost elements examined for necessity and reasonableness are materials' costs, labor costs, equipment and overhead. These costs can be compared with actual costs previously incurred for similar work, the cost or pricing data received from other suppliers, and independent cost estimate breakdowns.