Cost Analysis (FAR 15.404-1(c)) is the review and evaluation of each cost element in a contractor's proposal to determine if costs are allowable, allocable, and reasonable. Required when certified cost or pricing data is submitted. Includes evaluation of direct labor, materials, overhead, G&A, and profit.
is a metric concept federal contractors and grant writers run into across solicitations, regulations, and award filings
Cost Analysis is a measurement used in federal contract evaluation, source selection, oversight, or performance management. Understanding Cost Analysis matters because evaluators use metrics like it to compare proposals quantitatively, score past performance, set award-fee outcomes, and decide who gets the next option year. Contractors who track how Cost Analysis is calculated — and what target values look like in their NAICS or service area — write proposals that are concrete and defensible instead of generic and easily dismissed. Cost Analysis also has implications for contract administration: getting the calculation methodology wrong post-award is a common source of disputes and contracting-officer modifications. Pair Cost Analysis with the related metrics above to see how the federal government composes evaluation criteria into source-selection narratives.
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