CLC 056 Analyzing Contract Costs
UPDATED Actual Exam Questions and
CORRECT Answers
What is a fair price to the seller? - CORRECT ANSWER- ✔✔A fair price for the seller
means that the seller will be able to satisfy the terms and conditions of the contract. An offer
that is too low is considered unrealistic. It may:
•Cut corners on the quality of the product
•Deliver the product late
•Default on delivery, forcing a time-consuming reprocurement
•Refuse to deal with the government in the future
Below-Cost Prices - CORRECT ANSWER- ✔✔Below-cost prices are NOT necessarily
unfair to the seller. An offeror, for various reasons as part of business judgment, may decide
to submit a below-cost offer. However, these types of offers are not invalid.
Mistakes - CORRECT ANSWER- ✔✔The offered price may be unexpectedly low because
the seller has made gross mistakes in estimating costs or is non-responsible. A prospective
contractor must affirmatively demonstrate its responsibility, including, when necessary, the
responsibility of its proposed subcontractors.
Single-source Procurements - CORRECT ANSWER- ✔✔You need to remember that you
CANNOT force a final price/cost that will be below cost on the offeror, even if you believe
that the offeror has the financial ability to absorb the probable loss. Instead, negotiate a
contract with a type and price that is likely to cover all allowable costs of performance,
assume reasonable economy and efficiency, and provide a reasonable profit. Review FAR
15.404-4 and DFARS 215.404-4 on profit analysis.
Ensure your opening position is based on a more optimistic reading of the potential
production improvements, risks, and costs of providing the contract deliverable rather than
targeting price.
One of the elements of the government pricing objective is to ensure that contract prices are
fair and reasonable.
, Which of the following statements is true about "fairness to a seller" that involve concerns?
(Select all that apply)
*Sellers need to be concerned about an unrealistic low price because of the risk.
*Sellers need to be concerned about the market implications of a price that is too high.
*Sellers need to be concerned about major mistakes in estimating costs.
*Sellers need to be concerned about recovering buy-in losses. - CORRECT ANSWER-
✔✔All statements are true.
What is cost analysis? - CORRECT ANSWER- ✔✔Cost analysis is the review and
evaluation of the separate cost elements and proposed profit/fee of an offeror's certified cost
or pricing data or data other than certified cost or pricing data.
What is the primary objective as the government's buyer? - CORRECT ANSWER- ✔✔The
primary objective is to acquire supplies and services from responsible sources at fair and
reasonable prices.
What is the Prenegotiation Position? - CORRECT ANSWER- ✔✔Prenegotiation objectives
establish the government's initial negotiation position. The Contracting Officer establishes
prenegotiation objectives before the negotiation of any pricing action.
Review FAR 15.406-1 to learn more about Prenegotiation Objectives.
Round Table Cost Estimating Method - CORRECT ANSWER- ✔✔Experts are brought
together to develop cost estimates by exchanging views and making judgments based on
knowledge and experience.
Comparison Cost Estimating Method - CORRECT ANSWER- ✔✔Costs for a new item are
estimated using comparisons with the cost of completing similar tasks under past or current
contracts.
Detailed Cost Estimating Method - CORRECT ANSWER- ✔✔A thorough review of all
components, processes, and assemblies. It requires detailed information to arrive at estimated
costs and typically uses cost data derived from the accounting system, statistical records, and
other sources.
UPDATED Actual Exam Questions and
CORRECT Answers
What is a fair price to the seller? - CORRECT ANSWER- ✔✔A fair price for the seller
means that the seller will be able to satisfy the terms and conditions of the contract. An offer
that is too low is considered unrealistic. It may:
•Cut corners on the quality of the product
•Deliver the product late
•Default on delivery, forcing a time-consuming reprocurement
•Refuse to deal with the government in the future
Below-Cost Prices - CORRECT ANSWER- ✔✔Below-cost prices are NOT necessarily
unfair to the seller. An offeror, for various reasons as part of business judgment, may decide
to submit a below-cost offer. However, these types of offers are not invalid.
Mistakes - CORRECT ANSWER- ✔✔The offered price may be unexpectedly low because
the seller has made gross mistakes in estimating costs or is non-responsible. A prospective
contractor must affirmatively demonstrate its responsibility, including, when necessary, the
responsibility of its proposed subcontractors.
Single-source Procurements - CORRECT ANSWER- ✔✔You need to remember that you
CANNOT force a final price/cost that will be below cost on the offeror, even if you believe
that the offeror has the financial ability to absorb the probable loss. Instead, negotiate a
contract with a type and price that is likely to cover all allowable costs of performance,
assume reasonable economy and efficiency, and provide a reasonable profit. Review FAR
15.404-4 and DFARS 215.404-4 on profit analysis.
Ensure your opening position is based on a more optimistic reading of the potential
production improvements, risks, and costs of providing the contract deliverable rather than
targeting price.
One of the elements of the government pricing objective is to ensure that contract prices are
fair and reasonable.
, Which of the following statements is true about "fairness to a seller" that involve concerns?
(Select all that apply)
*Sellers need to be concerned about an unrealistic low price because of the risk.
*Sellers need to be concerned about the market implications of a price that is too high.
*Sellers need to be concerned about major mistakes in estimating costs.
*Sellers need to be concerned about recovering buy-in losses. - CORRECT ANSWER-
✔✔All statements are true.
What is cost analysis? - CORRECT ANSWER- ✔✔Cost analysis is the review and
evaluation of the separate cost elements and proposed profit/fee of an offeror's certified cost
or pricing data or data other than certified cost or pricing data.
What is the primary objective as the government's buyer? - CORRECT ANSWER- ✔✔The
primary objective is to acquire supplies and services from responsible sources at fair and
reasonable prices.
What is the Prenegotiation Position? - CORRECT ANSWER- ✔✔Prenegotiation objectives
establish the government's initial negotiation position. The Contracting Officer establishes
prenegotiation objectives before the negotiation of any pricing action.
Review FAR 15.406-1 to learn more about Prenegotiation Objectives.
Round Table Cost Estimating Method - CORRECT ANSWER- ✔✔Experts are brought
together to develop cost estimates by exchanging views and making judgments based on
knowledge and experience.
Comparison Cost Estimating Method - CORRECT ANSWER- ✔✔Costs for a new item are
estimated using comparisons with the cost of completing similar tasks under past or current
contracts.
Detailed Cost Estimating Method - CORRECT ANSWER- ✔✔A thorough review of all
components, processes, and assemblies. It requires detailed information to arrive at estimated
costs and typically uses cost data derived from the accounting system, statistical records, and
other sources.
