What kind of analysis seeks to determine if estimated costs reflect an understanding of the contract requirements?

Cost Realism Analysis is a method used to evaluate whether the estimated costs reflected in a proposal are realistic in the context of the contract requirements and the work to be performed. This process involves assessing the proposed costs against the actual resources, materials, and labor that would be necessary to fulfill the contract. The primary purpose is to ensure that the contracting organization is not just looking at the price but is also considering the viability of the proposal in terms of achieving the desired outcomes within the defined scope.

This analysis helps to verify that the estimated costs align with a practical understanding of the tasks involved and the associated risks, thereby ensuring that the proposals are not only competitive but also feasible and likely to succeed in delivering the required deliverables. By conducting a Cost Realism Analysis, the contracting authority can make better-informed decisions about which bids are both cost-effective and capable of meeting the contract's needs effectively.