Purchasing and Business Services Manual (PUR)

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Effective: 7/30/1976

Revised:7/1/2010

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PUR 303–04: Cost Analysis

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Purpose

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To ensure that prices paid for goods and services are reasonable

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Sources

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United States. Office of Management and Budget. OMB circular A-110 (revised November 19, 1993; further amended September 30, 1999), Procurement Standards, Subpart C, §§ .40 through .48
University policy

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Policy

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Purchasing and Business Services is responsible for determining that prices paid for goods and services are reasonable. Purchasing and Business Services buyers will review each procurement to ensure that the prices paid are reasonable.


Cost Analysis

Procurements of Less than $25,000

For procurements of less than $25,000, the buyer will use professional judgment as to whether or not the prices to be paid are reasonable. The buyer’s signature on the purchase document is the only evidence required that this determination has been made.

Procurements of at Least $25,000 but Less than $50,000

For procurements of at least $25,000 but less than $50,000, the buyer will compare quoted prices. In the event of a sole source or single bid received, the buyer will justify why the price is reasonable on the Informal Quote Summary Sheet or Telephone Bid Record.

Procurements of $50,000 or More

For procurements of $50,000 or more, the buyer will compare quoted prices. In the event of a sole source, the buyer will request from the sole source vendor a written quotation and a price warranty form. The buyer also may compare the price lists of similar suppliers, or compare the quoted price to the previously determined target price. If the buyer determines that the price is not reasonable, the buyer will request detailed cost and/or price data from the proposed vendor. For procurements of $25,000 or more in which a single bid is received, see the following section.

Single Bid Received in Procurements of $50,000 or More

For those formal solicitations where only a single bid is received, the buyer may review:

  1. current market prices
  2. General Services Administration (GSA) price schedules
  3. prices previously paid
  4. price lists of manufacturers of similar equipment

    and

  5. a previously established target price, if applicable.

If the buyer does not consider the quoted price reasonable, he or she will request detailed cost and pricing data from the proposed vendor.


Documentation

The contract file for procurements costing more than $50,000 that require a cost analysis must contain a statement that the buyer has reviewed the quoted prices and considers the price reasonable. The statement should contain the comparable prices used to make this determination.

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Cross-References

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For information on sole source procurements, see PUR 303–02, “Sole Source Procurement/Justification.”

For information on small dollar value procurements, see the policies under PUR 304, “Small Orders.”

For cost analysis information on used equipment purchases, see PUR 401–05, “Used Equipment.”


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