Price Analysis 101, Part 2
Welcome to SpendLogic. This is the second of two parts in our Fundamentals of Price Analysis video series. If you haven’t yet done so, go to spendlogic.com/help to watch part one. The concepts that we cover here today apply to all price analysis reports regardless of whether they’re completed within SpendLogic or not. It’s important that these basic concepts are well understood. This will help you understand what it is that SpendLogic is asking you to do.
At the end of the session today, you’ll know the basic requirements for conducting and documenting an acceptable price analysis. I’ll explain these points and show you how SpendLogic simplifies the task by automating these requirements. Let’s get started. These are the five steps that are necessary for any price analysis report. If you include each of these elements and provide explanations along the way, you’ll likely have an acceptable price analysis report.
I’ll walk through each of these in greater detail in the next screen. First, we have to choose a method. These are the examples set forth in the FAR. Contracting officers and auditors have a preference for competition in historical pricing because they typically result in higher fidelity estimates of future pricing. Other methods are acceptable, but if higher fidelity price analysis methods are available, those should be used first.
Here’s a screenshot from SpendLogic. You can see that each of the methods is listed as well as a Help me choose wizard at the bottom. It’s not shown on this screen, but SpendLogic also has the ability to conduct both low-price and best-value competitions. Next, we need to set forth the validity of the data we’re relying upon. For example, you may need to provide a little information to show that all of your bidders in a competition were provided an equal opportunity to bid, or that the basis priced used in historical analysis was a valid baseline.
Each price analysis method relies on some form of external data. You should be setting forth the validity of that data in your analysis. In SpendLogic, you’re required to explain how basis pricing is valid in historical analysis. Additionally, you’re prompted to explain any differences in terms and conditions between prior and current procurements. An example of how this works in competition is shown here.
You’re required to explain if RFPs and bids were provided and received from all bidders on the same date. If not, you’ll be required to provide additional explanations. Modify as necessary. If there are differences in timing, quantity, or improvement curves, these need to be taken into consideration in the price analysis report.
Likewise, if you’re conducting an analysis of a similar two item, similarities, differences in price impacts must be clearly defined and explained. In SpendLogic, this happens across multiple screens. Here, in the left-hand navigation, you can see that there are screens for Escalation, Quantity, and Complexity Adjustments.
The calculations are automated to a large degree, so including these in your reports is easy. Once you’ve made modifications, you need to show and explain the calculations. SpendLogic makes this particularly easy by requiring explanations along the way and including all of these explanations in one place in the report. You can see here in the final report that all of the calculations are clearly shown and then explained in further detail below in the note section.
Any reviewer, whether it’s a manager, contracting officer, or auditor, can easily understand and check your calculations. Finally, you have to set forth the result of your price analysis. Every SpendLogic report includes a conclusion that clearly states the result of the price analysis on the final page, as well as the intent to use this in negotiations.
This concludes part two of Price Analysis Fundamentals. Go to spendlogic.com/help to view other tutorial videos or reach out to us at [email protected]. Thanks for watching.