Should Care Cost Realism – Why Budget Analysts

Cost Realism ? Why Budget Analysts Should Care

PDI 2021 (Virtual)

Robert (Bob) L. Gustavus, CPA Department Chair Business, Cost Estimating & Financial Management DAU-Capital Northeast Region

INSTRUCTOR INTRODUCTION

Bob Gustavus CNE ? BCEFM Department Chair ? M.B.A ? Accounting and Finance ? B.B.A ? Accounting ? Certified Public Accountant ? Retired Naval Supply Corps Officer ? Acquisition and

Comptroller Experience ? Industry Experience ? Support Contractor and Owned my

own consulting firm ? Over 25 years in Academics ? Full-time Professor; Dept.

Head; Dean; and Director of Online. ? 15 years at DAU ? BCF, EVM, and CON classes

Contact Info: robert.gustavus@dau.edu

Why this topic.....

? Increase knowledge of what Cost Realism entails. ? Better communications with the Contracting Officer. ? Why it is important the Business Financial Manager

(BFM)/Budget Analyst be part of the team conducting Cost Realism. ? Help prevent budget shortfalls.

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Lexicon...speaking the language

A few basic terms and concepts..... ________________________ 1. Cost Realism Analysis 2. Price Reasonableness 3. Most Probable Cost 4. Full Funding...

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Realism and Reasonableness

Realism Analysis ? Assessing whether cost/price TOO LOW ? Govt. must fund to MOST LIKELY,throughout. ? Proposed rates not controlling on flexibly priced contracts. ? Rate cap provisions/clauses (competitive cost)

Reasonableness Analysis ? Assessing whether cost/price TOO HIGH ? At contract award (most important on FFP!) ? Proposed rates used in negotiating contract ARE controlling on FFP contracts. ? Rate reopeners (sole source fixed price)

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