Summary: The Defense Department (DOD), with the encouragement of Congress, is boosting its purchases of commercially available goods and services. Although commercial purchasing is still relatively small and sole-source commercial purchasing is even smaller, DOD expects commercial purchases to increase in the future. It believes that determining fair and reasonable prices for commercial sole-source items will continue to be challenging. The Federal Acquisition Regulation (FAR) cautions military contracting officers not to obtain more information than is necessary to determine price reasonableness, and it stresses the need to limit information requests of the contractors. However, contracting officers may ask contractors to provide sales prices for the same or similar items, to explain their discount policy, and to supply cost data. The FAR defines price analysis as the process of examining and evaluating a proposed price without evaluating its separate cost elements or process. This report (1) determines the extent of price analysis that DOD contracting personnel were doing to arrive at fair and reasonable prices for commercial sole-source items, (2) evaluates how well contract personnel did price analyses, and (3) determines what guidance and training was available to help them determine price reasonableness.
