Preface

Guide to Contract Pricing is intended to serve as a reference to answer the day-to-day issues that arise in establishing, evaluating, and negotiating a fair and reasonable contract price. It will help you learn how the government does business and help you perform every step of the contracting process successfully.

This master reference—now in its fifth edition—puts everything you need to know about government pricing rules and regulations in one easy-to-use volume. Electronic templates have been added to this fifth edition to make this work even more useful.

The reader will learn how to:

Apply appropriate formulas to evaluate or negotiate prices

Identify sources of market intelligence

Distinguish between market-based prices and cost-based prices

Know when to apply price analysis, cost analysis, and cost realism analysis

Apply different techniques of price analysis

Know what to obtain from contractors and suppliers to determine a fair and reasonable price

Structure solicitation requirements to obtain sufficient cost or pricing information to perform sound cost analysis or cost realism of different cost elements

Apply the principles and standards of Federal Acquisition Regulation (FAR) Part 31 to determine the allowability, reasonableness, and allocability of proposed or incurred costs

Perform sound cost analysis or cost realism of different cost elements (e.g., direct labor cost, direct material cost, other direct cost, indirect cost)

Evaluate proposed facilities capital cost of money

Apply the “structured profit approach” required by the FAR to evaluate proposed profit or fee

Calculate an equitable price adjustment for contract changes

Understand, and make the most of, the role played by contract auditors.

This fifth edition represents a long-term effort to combine and simplify the body of knowledge contained in two earlier public domain publications: the Armed Services Pricing Manual (circa 1986 and 1987) and the Cost and Price Analysis manuals used by the General Services Administration in the late 1980s. Like its forebears, Guide to Contract Pricing, 5th edition, can serve as a ready-reference desk guide as well as a training manual in the classroom and on the job.

John Edward Murphy