Analyzing Contract Costs and Prices

Introduction:

Achieving reasonably priced bids from contractors and suppliers is a key goal for businesses and government organizations. Understanding and performing detailed cost and price analysis is crucial for professionals to navigate the dynamic business environment. By acquiring best practice skills in price and cost analysis, those in contract and procurement roles can significantly enhance their effectiveness.

For professional development, individuals can pursue pricing or cost analyst certification to validate their expertise. This cost and price analysis training provides a solid foundation for contract analyst training and preparation for these credentials.

Objectives:

By the end of this training on cost and price analysis, participants will be able to:

• Exhibit the necessity of price/cost analysis in continuous improvement programs.
• Identify the differences between price analysis and cost analysis.
• Formulate criteria for different types of analysis.
• Identify appropriate methods of price analysis.
• Gain knowledge about supplier partnerships.
• Determine cost drivers using analytical approaches.
• Understand methods of cost analysis.
• Create cost models.
• Identify various types of Total Cost of Ownership (TCO) models.

Training Methodology:

• Real-world examples
• Problem-solving workshops
• Role-playing scenarios
• Q&A sessions
• Hands-on analysis tasks
• Peer feedback

Course Outline:

Unit 1: Cost Reduction Opportunities Commendable

• Reducing expenditure on procurement.
• Impact of contract savings on the bottom line.
• Identifying key focus factors.
• Understanding supplier pricing structures.
• Generating opportunity hypotheses.
• Reporting on cost-cutting measures.
• Skill sets for everyday improvement.

Unit 2: Price Analysis

• Distinguishing between price and cost analysis.
• Criteria for analysis type selection.
• Price analysis techniques.
• Recording historical information.
• Application of price indices.
• Determining price variations.
• Forming an organization Contract Price Index.

Unit 3: Cost Analysis

• Defining and describing cost estimation approaches.
• Overview of major cost components.
• Importance of overhead costs on supplier purchases.
• Benchmarking "should cost."
• Soliciting and assessing supplier cost information.
• Analyzing supplier cost structures.
• Determining adequate supplier profit margins.

Unit 4: Other Important Valuation Criteria

• Industry analysis on a larger scale.
• Global salary comparisons.
• Dealing with exchange rate risks.
• Total Cost of Ownership (TCO) analysis.
• Cost-cutting through process reengineering.
• Cost-volume-profit analysis.
• Value analysis techniques.

Unit 5: Preventing the Risk of Undue Pricing and Progressive Strategies

• Timing rights in an unstable economy.
• Adjustment clauses in contracts.
• Tools for continuous improvement.
• Early engagement with suppliers.
• Waste minimization in the value chain.
• Cost-saving reporting procedures.
• Strategies for achieving significant savings.