Price realism and cost realism
Also called: Cost realism analysis, Price realism analysis, Probable cost
Updated
What is Price realism and cost realism?
Cost realism and price realism test whether a proposed price is too low for the work described. Cost realism applies to cost-reimbursement contracts, where the agency adjusts each offer to a probable cost. Price realism may be used on fixed-price competitions, only when the solicitation says so, to judge risk and understanding.
How the two analyses work
FAR 15.404-1(d) defines both. For a cost-reimbursement contract the agency must perform a cost realism analysis and evaluates each offer at its probable cost, which can be higher than proposed if, for example, labor rates are below what the work requires. For a fixed-price contract the agency may perform a price realism analysis when the solicitation states it will; the result can affect the risk or technical assessment, but the offered price is not adjusted.
Both differ from price reasonableness, which asks whether a price is too high. Every award must be found fair and reasonable; realism is an extra test aimed at prices that are too low.
Pricing so you pass realism
Tie every number to the approach: hours from the staffing plan, rates that can actually hire the people named as key personnel, and escalation across option years. A basis of estimate that explains assumptions lets an evaluator follow the logic instead of assuming the worst.
Read Section M closely: it says whether realism applies and how findings affect the rating. An aggressive price on a realism competition can lead to a low understanding rating, and in a cost-reimbursement competition it may simply be adjusted upward.
Price realism and cost realism in ProposalWorkspace
ProposalWorkspace shows public GSA CALC+ ceiling rates for each labor category in the Labor Categories tab, matched on title, education and experience, as a reference point when the team checks its own rates. It does not price the proposal.
Price realism and cost realism: questions and answers
Can the agency raise my price in a fixed-price evaluation?
No. In a fixed-price competition a price realism finding can affect your risk or technical rating, but the price you offered is not adjusted. Cost realism adjustments apply to cost-reimbursement contracts.
What is the difference between price reasonableness and price realism?
Reasonableness asks whether a price is too high to be fair. Realism asks whether it is too low to be credible for the work proposed.
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