FAR Part 15: Contracting by Negotiation Practice Test

The main idea is that price analysis looks at the price itself and how it stacks up against market data or benchmarks to judge reasonableness, without dissecting the cost elements. Cost realism analysis, by contrast, digs into the contractor’s proposed costs to see if they are realistic for the work—examining the underlying cost elements (labor, overhead, materials, etc.) and the assumptions behind them, which is especially important for cost-reimbursement or non-fixed-price contracts.

So the best choice says: comparing the proposed price to benchmarks to determine reasonableness, and checking whether the proposed costs are realistic for the work. That captures the distinct purposes: price analysis is market-based and element-agnostic, while cost realism is an in-depth check of the viability of the cost proposal itself.