Price analysis- Economics...
Published on: Mar 4, 2016
Transcripts - Price analysis-Economics
Price Analysis is the process of deciding if the asking price for a
product or service is fair and reasonable, without examining the
specific cost and profit calculations the vendor used in arriving at
It is basically a process of comparing the price with known
indicators of reasonableness.
Examples of other forms of price analysis information include:
• Analysis of previous prices paid
• comparison of vendor’s price with the in-house
• comparison of quotations or published price lists from
• comparisons with GSA prices
Here are some basic techniques.
Price analysis. Use as many of the following techniques as
applicable and appropriate:
Compare competitive prices received in response to the
solicitation to one another. This assumes you receive a large
enough number of competitively priced offers from the
Compare proposed prices with prices under existing contracts
and with prices proposed in the past for the same or similar
items/services. Be sure to factor in any market changes (e.g.,
commodity price changes) or other influences (e.g.,
Apply rough yardsticks (e.g., dollars per pound, per square foot,
per hour, etc.) to compare prices and highlight significant
inconsistencies that warrant additional pricing inquiry.
Compare competitive price lists, published catalog or market
prices of commodities and products, similar indices and discount
or rebate arrangements.
Compare proposed prices with your independent (i.e., in-house)
How do price analysis apply to the different
For routine, commercial type purchases, comparing price or
rate quotes obtained from an adequate number of qualified
vendors is sufficient price analysis.
If the small purchase is for professional or technical services, or
the HA needs to evaluate other factors than price, then at least a
limited cost analysis is appropriate.
In either case, the HA's analysis should include comparing the
proposed prices to past prices it has paid for the same or similar
items or services.
This method is most often used to contract for
professional, consulting, and architect/engineering.
To determine the reasonableness of proposed costs, you
must obtain cost breakdowns from the offerors showing
all the elements of their proposed total costs and perform
a cost analysis of each proposal using the appropriate set
of cost principles.
These are sometimes called sole source contracts and are
different from single bids. No competition is intended, and
usually, there is no market to help set the price or estimated
Since there is no price competition to tell you if the price or
estimated cost is reasonable, you must obtain a breakdown
of the proposed costs and perform a cost analysis.