Contract pricing negotiations

Seller Pricing Strategies, Contracting Strategy, Application of Appropriate Contract Type, Quantitative Pricing Skills, Price Analysis Techniques, Market Research Analysis

Please clearly indicate your selected answer by highlighting it.

1. When we set a primary goal of recovering our variable costs, what pricing strategy is employed?

Buy-in pricing
Rule-of-thumb pricing
Demand pricing
Cost-plus pricing
2. An economic price adjustment clause was included in a two-year contract for 700,000 gallons of fuel at $3.60 per gallon. The Producer Price Index (PPI) for January 2016, the month of the award, is 179. If the PPI for January 2017 is 185, what will the contract price per gallon adjust to for the second year?

3. External market variables influence the seller pricing strategies EXCEPT:

Nature of the product
Seller’s control variables
Market characteristics
Buyer’s control variables
4. Market research documentation is the foundation for the government’s cost estimate, expected level of competition, contract terms.

5. What is the purpose of Market Research?

To become informed buyers
Find sources capable of satisfying the agency’s requirements
Determine the most suitable approach to acquire supplies and services
All the above
6. All the following are price analysis techniques EXCEPT.

Comparison to other proposed prices
Comparison of price obtained through market research
The review and evaluation of the separate cost elements and profit in an offeror’s or contractor’s proposal
Comparison of proposed prices with Government cost estimates
7. Which of the following concepts are commonly used as quantitative techniques for contract pricing?

Price Indices
Cost-Volume-Profit Analysis
Regression Analysis
All of the above
8. What is the most important financial data element in Market Research?

Return on Investment
Seller’s sales forecasts
Return on Assets
Return on Equity
9. Your organization has a requirement to upgrade the electrical wiring in a previously unused aircraft hangar as part of a base renovation program. The scope considers labor and material for the effort. Assume that you have solicited an electrical contractor to perform the re-wiring task. Electrical diagrams are not available, and the subcontractor will have to submit an estimate without a detailed Statement of Work. Your market research indicates fluctuation in conditions, and capabilities to do this effort. What is the most appropriate contract type to use for this effort?

Firm Fixed Price
Fixed Price Level of Effort
Fixed Price Incentive Fee
Cost Plus
10. You are the contacting specialist helping to form the government estimate for a new security guard contract. Based on the market research data and the information calculated below, which is the BEST Cost Estimating Relationship (CER) to build a government estimate?



Guard Posts

$ Per Post


$ Per Hour

























Dollars per post, because the average of the dollars per post are more tightly clustered than the average of the dollars per hour
Dollars per hour, because the average of the dollars per hour are more loosely clustered than the average of the prices per post
Dollars per post, because the average of the dollars per post are more loosely clustered than the average of the dollars per hour
Dollars per hour, because the averaged of the dollars per hours are more tightly clustered than the average of the dollars per post
End of Exercise 1

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