Cost Realism

Definition

Cost Realism analysis (FAR 15.404-1(d)) is an evaluation of a cost proposal to determine whether the proposed costs are realistic for the work to be performed. Required for cost-reimbursement contracts. The government assesses whether costs are understated (buying in) or overstated. Unlike cost reasonableness, cost realism looks at whether costs reflect what performance WILL cost, not whether the price is fair.

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