Cost realism
Also called: cost realism analysis, realism analysis, price realism, probable cost, unrealistically low price
Cost realism is the government's evaluation of whether the costs in a proposal are realistic for the work, reflect a clear understanding of the requirements, and are consistent with the technical approach the offeror described.
FAR 2.101 defines cost realism and FAR 15.404-1(d) requires a cost realism analysis on every cost-reimbursement contract, where the government may adjust proposed costs upward to a probable cost and evaluate on that figure instead of the bid. On fixed-price work the same look is called price realism and may be used only when the solicitation says so; there the result is a judgment about risk or understanding rather than an adjusted price, and an unrealistically low price can lose the award rather than win it.
What to check: whether Section M mentions realism and for which volumes, that your labor categories, hours and rates match the staffing in the technical volume line by line, and that any aggressive assumption (shared staff, lower rates, fewer hours than the incumbent) is explained where the evaluator will read it. Unexplained gaps between the two volumes are the usual reason a probable cost rises.
What it is not: a check that the price is low enough. That is price reasonableness, which runs in the other direction.
See also: Fair and reasonable price, Cost-reimbursement (cost-plus) contract, Price volume, Technical volume
Questions that use this term
Search allA basis of estimate (BOE) explains how you calculated your proposed price, and for a firm-fixed-price bid, it needs to be detailed enough to show...