Federal glossary · Metric
Should-Cost analysis is a specialized form of cost analysis where the government develops its own estimate of what a contract SHOULD cost. Goes beyond cost realism to identify inefficiencies in the contractor's operations. Used on major acquisitions to negotiate better prices and improve contractor efficiency.
Example: The Simplified Acquisition Threshold or a fiscal-year budget measure.
Reference record · Sources: OMB budget guidance · Verified Jul 2, 2026 · Covers definition, governing source
Also known as
Should-Cost analysis is a specialized form of cost analysis where the government develops its own estimate of what a contract SHOULD cost. Goes beyond cost realism to identify inefficiencies in the contractor's operations. Used on major acquisitions to negotiate better prices and improve contractor efficiency.
is a metric concept federal contractors and grant writers run into across solicitations, regulations, and award filings
Should Cost is a measurement used in federal contract evaluation, source selection, oversight, or performance management. For example: Example: The Simplified Acquisition Threshold or a fiscal-year budget measure. Understanding Should Cost 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 Should Cost 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. Should Cost also has implications for contract administration: getting the calculation methodology wrong post-award is a common source of disputes and contracting-officer modifications. Pair Should Cost with the related metrics above to see how the federal government composes evaluation criteria into source-selection narratives.
Example: The Simplified Acquisition Threshold or a fiscal-year budget measure.
Meaning in practice
Should Cost is a measure used to score, compare, or track government activity.
Where you’ll see it
You will see it in evaluation criteria, dashboards, scorecards, reports, and oversight reviews. Example: Example: The Simplified Acquisition Threshold or a fiscal-year budget measure..
Common confusion
People often confuse the metric with the threshold or decision rule attached to it.
What to do next
Check how the metric is calculated before you compare records or opportunities.
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