Cost Realism Analysis

Definition

Cost Realism Analysis (FAR 15.404-1(d)) evaluates whether 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. Adjustments are made to the evaluated cost, not the proposed cost — so underpricing does NOT give you a competitive advantage. Unlike cost reasonableness, cost realism looks at whether costs reflect what performance WILL cost.

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