Templates | Award Phase-Cost Reasonableness Policy Example

Cost Reasonableness Policy Example

Pdf Summary

The City of San Marcos' Cost Reasonableness Policy for Community Development Block Grant Disaster Recovery (CDBG-DR) purchases aligns with federal regulations, ensuring costs are prudent and justified. According to 2 CFR 200.404, costs must not exceed what a prudent person would incur under the circumstances.<br /><br />A key component is the Independent Cost Estimate (ICE), required for procurement actions such as new contracts, contract modifications, procurements above simplified acquisition thresholds, or when insufficient competitive bids are received and re-solicitation is not pursued. ICEs must be prepared before solicitation and updated if market conditions or more than six months have passed before offers are received. ICE development relies on historical pricing, catalogs, previous bids, personal experience, or detailed analyses. The relevant project team prepares the ICE, with the project manager reviewing and signing off on its validity. Documentation supporting the ICE must be retained in procurement files.<br /><br />Cost reasonableness is determined through Price or Cost Analysis. Price Analysis compares supplier quotes, ICE, previous purchases, and catalogs and is applied for simple purchases, sealed bids, or small purchases, generally requiring at least three bids for fair competition. If fewer bids are received, prices are compared to prior data or third-party estimates. Micro-purchases (under $2,000) require simplified documentation.<br /><br />Cost Analysis involves a detailed review of individual cost elements to assess reasonableness, allocability, and allowability, used in complex, noncompetitive, or widely varying price scenarios, contract modifications affecting scope, or when price isn’t the sole award factor.<br /><br />Procurement staff develop analyses with project manager acceptance; Purchasing Department finalizes and executes documentation. When competition is insufficient in sealed bids, the responsible department documents and justifies proceeding with current bids or re-solicitation, then completes the requisite cost reasonableness method. All records are maintained by both the project department and Purchasing Department to ensure transparency and compliance.

Keywords

San Marcos

Cost Reasonableness Policy

Community Development Block Grant

CDBG-DR

Independent Cost Estimate

Price Analysis

Cost Analysis

Procurement

Federal Regulations

2 CFR 200.404