If you are in charge of finding goods or services for your organization, you must conduct a price analysis of goods and services offered by contractors and vendors. A price analysis compares prices without evaluating the cost elements the price is composed of. You can understand price analysis by contrasting it with cost analysis, which evaluates all the separate elements that make up the price. Your price analysis will help management decide whether or not to make the purchase. Write your price analysis as a prose document containing five sections.
Write the first section of your price analysis by comparing the proposed price of a good or service to all offered prices. State simply where the proposed price falls in the range of all prices that have come in from bidders, contractors or vendors. Do not evaluate the fairness of the price at this stage.
Compare the proposed price to the contract price. Your purchasing contract should contain a price your organization is willing to pay. Write a brief description of how the proposed price compares to the price listed in your current purchasing contract.
Write a comparison of the proposed price to historic or previous contract prices. Note how much of a decrease or increase the proposed price represents in light of what has been paid in the past.
Compare the current item's proposed price to prices of similar items. Find some correlation in the marketplace to goods and services that can be considered comparable. This will help you decide if the price is in a tolerable range.
Close your evaluation with a statement of whether the price is fair and reasonable. "Fair and reasonable" means the price is not more than what a prudent person or company would pay in a competitive business.