Which statement best describes price evaluation in a source selection?

• A. Price is the sole determinant
• B. Price is never evaluated
• C. Price is evaluated only for like-sized contracts
• D. Price or cost to the Government shall be evaluated in every source selection, with cost analysis used in limited situations to establish reasonableness

Answer: (D)

Price or cost evaluation in every source selection is essential to ensure the government receives a fair price while still achieving the best overall value for the required performance. In FAR Part 15, the process starts with price analysis to judge whether the proposed price is fair and reasonable based on market data and other price information. If that analysis isn’t enough to establish reasonableness—such as when data are insufficient or the work is complex—a more detailed cost analysis is used to scrutinize the actual cost elements, including direct and indirect costs, profits, and contingencies, to confirm the proposed costs align with the work to be performed and the contractor’s accounting practices. This approach applies to all source selections, not limited to any particular contract size. Therefore, price or cost to the Government shall be evaluated in every source selection, with cost analysis used in limited situations to establish reasonableness.