Price Analysis in Various Situations
Price analysis is a price comparison of a proposed price without analyzing any of the separate cost of elements that it’s composed of. With any purchase some type of cost analysis is completed in order to receive the best price possible. This paper will discuss which method for performing price analysis is best in the widest variety of situations. The policy of the government is to contract for its products and services at fair and reasonable prices.
With that, many factors are taken into account when determining fair and reasonable prices and how the government determines fair and reasonable pricing. There are five means identified to determine fair and reasonable pricing: competitive offers, established catalog prices, established market prices, established by law and regulation, and cost based prices. Fair and reasonable price is what the government is willing to pay for products and services in competitive market conditions given reasonable knowledge of the marketplace.
When the government acquires various products and services it must forecast the products and services in its budget and be able to convince the reviewing authorities the the forecast is reasonable. When forecasting the likely price of acquisition evaluation of bids, proposals, and quotations has to be completed. Then, the bidder or offeror for the reward must be selected and then the preparation for price discussion in negotiation. Given the opportunity to use any method of price analysis for the duration of my career, I would choose comparison of competitive bids.
With this method three or more suppliers for the price of the same product are selected in order to determine if a particular price is reasonable. However, it’s not the best idea to go solely on the lowest bid without knowing full details into how that figure came about. Cheaper is not always the best value. Instead of comparing the lowest price, compare the total cost of acquisition. This includes variable cost, fixed cost, and semi-variable cost. When all these items are discussed a fair and reasonable price is at hand.
If taking the lowest price is the key then there would be no value if what is purchased is unknown. In all, Price analysis is a price comparison of a proposed price without analyzing any of the separate cost of elements that it’s composed. Given the opportunity to choose the method of price analysis, I would choose comparison of competitive bids because it allows multiple offers to be compared and other factors of discussion in negotiaton of priceing.