Description
You just created a new start-up company called Superstar Solar, Inc., because you want to compete in the growing industry of solar power grids. SolarCal (as described in the case analysis) is currently the only major company in the field. Your views on SolarCal are that the company charges a lot for their products and takes a long time to manufacture them. You feel that your company can be a more efficient version of SolarCal.
Keep in mind: When you are completing this assignment, you should be creating all the necessary assumptions to support your claim of being more efficient.
Refer to the Course Guide to become familiar with how your paper will be graded.
Refer to scenarios and readings from previous weeks to complete this assignment.
Note: It is essential that you review your case analyses when completing this assignment.
Week 1 Case Analysis: Basic Pricing Policy and Concepts [DOCX] Download Week 1 Case Analysis: Basic Pricing Policy and Concepts [DOCX].
Week 2 Case Analysis: Contracting Methods and Contract Types: Pricing Implications [DOCX] Download Week 2 Case Analysis: Contracting Methods and Contract Types: Pricing Implications [DOCX].
Week 3 Case Analysis: Price Analysis [DOCX] Download Week 3 Case Analysis: Price Analysis [DOCX].
Instructions
Write a 2-3 page paper in which you:
Describe your new company called Superstar Solar, Inc.
Include specific details about the following in your description:
The reason why your company was formed.
Your company’s mission statement (what is the “why” for the work that you do).
Your company’s vision statement (where you see the company’s growth over the next three to five years).
Your company’s solar power product.
An overview of your key personnel. Note: Refer to your Week 3 Case Analysis on SolarCal for help on this overview.
Your targeted client base. Note: Be specific. For example, instead of listing the government in general, you would focus on the Department of Agriculture.
Describe SolarCal.
Include specific details about the following in your description:
The reason why SolarCal was formed.
SolarCal’s mission statement (what is the “why” for the work that you do).
SolarCal’s vision statement (where you see the company’s growth over the next three to five years).
SolarCal’s solar power product.
An overview of SolarCal key personnel. Note: Refer to your Week 3 Case Analysis on SolarCal for help on this overview.
SolarCal’s targeted client base. Note: Be specific. For example, instead of listing the government in general, you would focus on the Department of Agriculture.
Pricing analysis methods when forecasting government expenses.
Describe three types of pricing analysis methods that might be appropriate for SolarCal to use to forecast the prices of its products and services when contracting with the government.
Select one of those three methods and provide a rationale to support your choice. Be sure to include at least two reasons why you think that method is the best option.
Describe three types of pricing analysis methods (Comparison of proposed prices, comparison of market prices, etc.) that your company will consider when forecasting prices.
Select one of those three methods and provide a rationale to support your choice. Be sure to include at least two reasons why you think that method is the best option.
Use at least three quality resources in this assignment. Note: Wikipedia and similar websites do not qualify as quality resources.
The Strayer University Library is a good source for quality resources. To get started, please refer to the library page for this course.
This course requires the use of Strayer Writing Standards (SWS). The library is your home for SWS assistance, including citations and formatting. Please refer to the Library site for all support. Check with your professor for any additional instructions.
The specific course learning outcome associated with this assignment is:
Outline details for a new start-up company including a forecasting approach and cost considerations.
View Rubric
Week 3 Assignment – Introduction of Solar Technology Company
Week 3 Assignment – Introduction of Solar Technology Company
Criteria Ratings Pts
Describes the new company, including specific details about the reason your company was formed, its mission statement, and its vision statement.
view longer description
18 to >16.2 pts
Exemplary
Describes your new company. including specific details about the reason your company was formed, its mission statement, and its vision statement.
16.2 to >14.4 pts
Competent
Describes your new company including specific details about at least two of the following: the reason your company was formed, its mission statement, its and vision statement.
14.4 to >12.6 pts
Satisfactory
Describes your new company and includes some detail on at least one of the following: the reason your company was formed, its mission statement, or its vision statement.
12.6 to >10.8 pts
Needs Improvement
Describes your new company, but lacks specific details on the reason your company was formed, its mission statement, its vision statement.
10.8 to >0 pts
Unacceptable
Did not submit or does not describe your new company.
/ 18 pts
Describes your company using specific details about the main product, an analysis of your key personnel, and your targeted client base.
view longer description
16.8 to >15.12 pts
Exemplary
Describes your company using specific details about the main product, an analysis of your key personnel, and your targeted client base.
15.12 to >13.44 pts
Competent
Describes your company, with specific details about at least two of the following: main product, analysis of key personnel, and targeted client base.
13.44 to >11.76 pts
Satisfactory
Describes your company, with specific details about at least one of the following: main product, analysis of key personnel, and targeted client base.
11.76 to >10.08 pts
Needs Improvement
Describes your company, lacking specific details about the following: main product, analysis of key personnel, and targeted client base.
10.08 to >0 pts
Unacceptable
Did not submit or does not describe your company.
/ 16.8 pts
Describes SolarCal, including specific details about the reason your company was formed, its mission statement, and its vision statement.
view longer description
16.8 to >15.12 pts
Exemplary
Describes SolarCal including specific details about the reason the company was formed, its mission statement, and its vision statement.
15.12 to >13.44 pts
Competent
Describes SolarCal including specific details about at least two of the following: the reason the company was formed, its mission statement, and its vision statement.
13.44 to >11.76 pts
Satisfactory
Describes SolarCal and includes some detail on at least one of the following: the reason the company was formed, its mission statement, or its vision statement.
11.76 to >10.08 pts
Needs Improvement
Describes SolarCal, but lacks specific details on the reason the company was formed, its mission statement, its vision statement.
10.08 to >0 pts
Unacceptable
Did not submit or does not describe SolarCal.
/ 16.8 pts
Describes SolarCal using specific details about the main product, an analysis of the key personnel, and your targeted client base.
view longer description
16.8 to >15.12 pts
Exemplary
Describes SoalrCal using specific details about the main product, an analysis of key personnel, and your targeted client base
15.12 to >13.44 pts
Competent
Describes SolarCal, with specific details about at least two of the following: main product, analysis of key personnel, and targeted client base.
13.44 to >11.76 pts
Satisfactory
Describes SolarCal with specific details about at least one of the following: main product, analysis of key personnel, and targeted client base.
11.76 to >10.08 pts
Needs Improvement
Describes SolarCal lacking specific details about the following: main product, analysis of key personnel, and targeted client base.
10.08 to >0 pts
Unacceptable
Did not submit or does not describe SolarCal.
/ 16.8 pts
Describes three types of pricing analysis methods (comparison of proposed prices, comparison of market prices, etc.) that SolarCal might consider when forecasting prices. Selected and provided rationale (with at least two reasons) why that option is the best choice.
view longer description
16.8 to >15.12 pts
Exemplary
Describes three types of pricing analysis methods (comparison of proposed prices, comparison of market prices, etc.) that SolarCal will consider when forecasting prices. Selects and provides rationale (with at least two reasons) why that option is the best choice.
15.12 to >13.44 pts
Competent
Describes at least two pricing analysis methods with some detail to differentiate between them and selects one as most appropriate. Provided one reason for the selection.
13.44 to >11.76 pts
Satisfactory
Describes at least two pricing analysis methods with some detail to differentiate between them and selects one as most appropriate. Does not provide a rationale for the selection.
11.76 to >10.08 pts
Needs Improvement
Lists pricing analysis methods, but lacks detail on how they differ. Does not select one method for SolarCal.
10.08 to >0 pts
Unacceptable
Did not submit or does not list pricing analysis methods.
/ 16.8 pts
Describes three types of pricing analysis methods (comparison of proposed prices, comparison of market prices, etc.) that your company will consider when forecasting prices. Selects and provides rationale (with at least two reasons) why that option is the best choice.
view longer description
16.8 to >15.12 pts
Exemplary
Described three types of pricing analysis methods (comparison of proposed prices, comparison of market prices, etc.) that your company will consider when forecasting prices. Selects and provides rationale (with at least two reasons) why that option is the best choice.
15.12 to >13.44 pts
Competent
Describes at least two pricing analysis methods with some detail to differentiate between them and selects one as most appropriate. Provides one reason for the selection.
13.44 to >11.76 pts
Satisfactory
Describes at least two pricing analysis methods with some detail to differentiate between them and selects one as most appropriate. Does not provide a rationale for the selection.
11.76 to >10.08 pts
Needs Improvement
Lists pricing analysis methods, but lacks detail on how they differ. Does not select one method.
10.08 to >0 pts
Unacceptable
Did not submit or does not list pricing analysis methods.
/ 16.8 pts
Three quality references.
view longer description
6 to >5.4 pts
Exemplary
Uses three quality references.
5.4 to >4.8 pts
Competent
Uses at least two quality references.
4.8 to >4.2 pts
Satisfactory
Uses at least two references, where at least one was quality.
4.2 to >3.6 pts
Needs Improvement
Uses at least one reference, but none of the references are quality.
3.6 to >0 pts
Unacceptable
Did not submit or provides no references.
/ 6 pts
Clarity, writing mechanics, and SWS formatting requirements.
view longer description
12 to >10.8 pts
Exemplary
0–2 errors present.
10.8 to >9.6 pts
Competent
3–4 errors present.
9.6 to >8.4 pts
Satisfactory
5–6 errors present.
8.4 to >7.2 pts
Needs Improvement
7–8 errors present.
7.2 to >0 pts
Unacceptable
More than 8 errors present.
/ 12 pts
Total Points: 0
Unformatted Attachment Preview
BUS315 Week 2 SolarCal Case Analysis
Contracting Methods and Contract Types: Pricing Implications
Participants:
Sally- Intern
Dominic- CEO of SolarCal
Luke- Head of Productions
Jake- Head of Accounting/Finance
Melissa- Head of Government Contracting
Dominic: Good morning Sally! Welcome back! How was your first week at SolarCal?
Sally: Well hello Dominic. . . Last week was fantastic! I can’t believe how much I learned in one week at this
position.
Dominic: Great because this week you are going to be working with Melissa Mason, our Department Head for
Government Contracting, to talk about contracting methods, sealed bidding, and government contract types.
Please follow me!
Sally: Sounds good! Let’s go!
Dominic: Sally, I would like to introduce you to Melissa again, you met during our introduction conference last
week. As I said before, you will be working with her this week on a special project involving a government
contract.
Dominic: Melissa, this is Sally, you two met last week briefly.
I would like you to show Sally what you and this department do to make sure we are following all of the U.S.
Environmental Protection Agency regulations for conducting business.
Melissa: I’m excited to get started Dominic! I would very much enjoy showing Sally what we do here in the
Government Contracting Office.
Melissa: Sally, please follow me and let’s get started.
Melissa: So where should we start at? I think a good place to start is with the information Dominic gave you.
What did Dominic cover with you?
Sally: Well, last week I spent a lot of time with Dominic as he covered a lot of what you all do here at SolarCal.
Melissa: Great! Can you tell me a little bit about what you know about government contracting?
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Confidential and Proprietary information and may not be copied, further distributed, or otherwise
disclosed in whole or in part, without the expressed written permission of Strayer University.
Sally: Sure thing! I remember when I was in school, we learned that the federal acquisition regulations have
two acceptable procedures for obtaining competitive prices. I’m pretty sure the first procedure dealt with sealed
bidding. I recall this is a process by which government needs are made known by a solicitation called an
Invitation for Bids. I also know that sealed bidding is used when the government contracting officer decides
that adequate price competition exists, and that the specification or statement of work is well enough defined to
enable offers to bid on a fixed-price basis.
Melissa: That is a great start! You have properly identified one of our first procedures. We will now move on to
the second procedure we may utilize. But, first do you have any questions?
Sally: I actually do have one question. I noticed that SolarCal doesn’t really have that much competition for its
products, especially inside the country, so which approach does the government use with your company?
Melissa: That is a very good question and I will explain this operation to you now. The second acceptable
procedure for obtaining competitive prices is referred to as competitive proposals. This is a process by which
the government needs are made known by a solicitation called a Request for Quotation or a Request for
Proposals. Here at SolarCal, we are the only company already producing the solar panel system for General
Solar, the company that produces the solar panel grids for the government. As a result of this, we have already
achieved a good set of cost cutting strategies on a large scale through the buying practices for the materials
needed to build our systems.
Sally: That definitely adds some clarity now!
Melissa: The process doesn’t end there though! Next, my department had to see which of the five categories of
contract types being used by the government. These five categories are important to identify and consist of the
following:
Fixed-price contracts;
Cost-reimbursement contracts;
Incentive contracts;
Indefinite-delivery contracts; and
Time-and materials contracts.
We will look at the first two categories, thus fixed-price and cost-reimbursement contracts. The other three
categories are special modifications of either fixed-price contracts or cost-reimbursement contracts. We can take
a closer look at these three other categories next time you are rotating in my department.
Sally: That sounds good to me! I’m excited to explore these concepts further!
Melissa: That’s great! Let’s get started, Sally what do you know about these contract types?
Sally: Well, I know that in fixed-price contracts, the costs of performance can be predicted with great
accuracy. Firm-fixed price contracts places the total cost risk on the contractor. The person who bids or
© 2020 Strayer University. All Rights Reserved. This document contains Strayer University
Confidential and Proprietary information and may not be copied, further distributed, or otherwise
disclosed in whole or in part, without the expressed written permission of Strayer University.
proposes to a firm a fixed price to do work is guaranteeing to deliver the work to meet the requirements for that
amount of money. I think that when the government accepts the offer, it is obligated to pay that amount of
money and the contractor is similarly obligated to deliver or perform the work for that fixed price. Is this
correct?
Melissa: You are very correct with your explanation. When determining the cost of our materials, the direct and
indirect expenses for the future was something the CEO was not comfortable with.
Sally: What about cost reimbursement contracts which are almost always awarded as the result of negotiations?
I know that cost-reimbursement contracts provide for payment of the contractor’s allowable incurred costs to
the extent prescribed in the contract. Aren’t these contracts used when the costs of performing the contract work
cannot be predicted with high accuracy at the time of signing the contract?
Melissa: That is a very excellent point and an even better question! Keep in mind that cost reimbursement
contracts establish an estimate of total costs for purposes of obligating funds and stating a ceiling that the
contractor must not exceed except at its own risk. This also means that the government is carrying all, or
essentially all of the cost risk in a cost-reimbursement contract.
Sally: That makes a lot of sense now! I guess I knew more about these concepts than I originally thought!
Melissa, what method does SolarCal use?
Melissa: Well, it really depends on the contract. For example, if the contract calls for a fixed fee, the
government must pay that fee. So, in this case SolarCal would be using a fixed-price contract.
Sally: Thank you for sharing that with me, I can see why the identification of categories is an important task.
Melissa: I sense that you have a good foundation for the many tasks that my office does to support the
company.
Let’s continue our discussion with something new.
Melissa: Sally, have you ever heard of the Simplified Acquisition Procedures?
Sally: I think I remember a little about this concept from one of my classes. Doesn’t Simplified Acquisition
Procedures apply to purchases below the small purchase limitation; I recall this as being one hundred thousand
dollars for all agencies?
Melissa: You are doing great! What else do you recall?
Sally: I’m pretty sure these procedures do not apply to ordering from Federal Supply Schedules or delivering
orders placed against existing contracts. I also know that the small purchase and simplified purchase procedures
emphasize simplicity and minimal administrative costs. I remember that oral solicitations are normally used,
although very simple written quotations may be used under certain circumstances.
© 2020 Strayer University. All Rights Reserved. This document contains Strayer University
Confidential and Proprietary information and may not be copied, further distributed, or otherwise
disclosed in whole or in part, without the expressed written permission of Strayer University.
Melissa: Right you are! Great job Sally! Where did you attend school again? I’m shocked because most of our
new employees don’t usually know nearly as much as you do.
Sally: I attended Strayer University of course!
Melissa: Wow Strayer really educates and prepares their students for successful careers! I need to look into this
school and see if they offer an online program I can enroll a couple of my employees into.
Melissa: Sally, I would now like for you to go through some interactive training materials to help build upon
some key concepts from today’s lesson.
Simplified acquisitions are the procedures applied to purchases below the small purchase limitation, which is
presently one hundred thousand dollars for all agencies. These procedures do not apply to ordering from Federal
Supply Schedules or to delivery orders placed against existing contracts. The small purchase and simplified
purchase procedures also emphasize simplicity and minimal administrative costs.
Cost reimbursement contracts are contracts that provide for payments of the contractor’s allowable incurred
costs to the extent prescribed in the contract. These contracts are used when the costs of performing the contract
work cannot be predicted with high accuracy at the time of signing the contract. A cost reimbursement contract
also establishes an estimate of total costs for purposes of obligating funds and stating a ceiling that the
contractor must not exceed except at its own risk.
Fixed-price contracts place the total cost risk on the contractor. The offer who bids or proposes a firm a fixed
price to do work is guaranteeing to deliver the work to meet requirements for that amount of money.
Sealed Bidding is the activity of preparing an acquisition request that describes its needs and cites funds for the
acquisition. The upcoming acquisition is publicized through distribution to prospective bidders and posted in
public places. The price that was bid on by each offer becomes publicly known once the bids are opened. Sealed
bidding always leads to a firm-fixed-price contract or fixed-price with economic adjustment contract.
© 2020 Strayer University. All Rights Reserved. This document contains Strayer University
Confidential and Proprietary information and may not be copied, further distributed, or otherwise
disclosed in whole or in part, without the expressed written permission of Strayer University.
BUS315 Week 3 SolarCal Case Analysis
Price Analysis
Participants:
Sally- Intern
Dominic- CEO of SolarCal
Luke- Head of Productions
Jake- Head of Accounting/Finance
Melissa- Head of Government Contracting
Dominic: Good morning Sally!
How did everything work out with your job shadowing of Melissa?
Sally: Good morning to you too! Last week was amazing! Melissa was great! She showed me
what her department is all about and really solidified my knowledge of government contracting.
Dominic: That is fantastic, Sally! I’m glad that this internship is really opening your eyes to not
only what SolarCal does but also how the industry functions as a whole.
This week I will have you working with Jake and his department. I think this will be a great
learning experience for you and will really give you another in-depth look at our day-to-day
operations.
Sally: That sounds great! I’m excited to get started!
Dominic: Good morning Jake! I have brought Sally here to work with you for the week. Could
you show her around and provide her with a better understanding of what your department
accomplishes?
Jake: Sure thing, Dominic! I have a list of tasks for Sally.
Dominic: That is fantastic! Thank you, Jake! Sally, I will talk with you later about how
everything went while you were here. Take care!
Sally: Thank you both! It’s nice to meet you again Jake! I am really excited to begin learning
about the production process at SolarCal.
Jake: It’s my pleasure to be working with you, Sally! So, before we begin, are there any
questions you would like for me to answer?
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University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
Sally: Well, I know you deal with the production of SolarCal’s navigation systems. The only real
question I have is how do you run a price analysis for solar panel systems? I remember
something about the price analysis being very important in the production phase from some
business classes I took at Strayer University.
Jake: I’m glad you remembered that information. You are correct. The price analysis is very
important during the production phase. You are in luck, because I have a new approach to
explaining how we establish all of our price points for our products.
Let’s get started!
Jake: I just moved all of my presentations to the new tablets all managers received last week.
Please take a tablet and follow along as we go over some key parts of this presentation. Keep in
mind that if you want to share something, these tablets can be hooked up to a projector to
highlight things you find interesting.
Sally: These tablets are really nice, and I will definitely take you up on showcasing my findings
on the projector. I’m actually checking out the section on price analysis right now.
Jake: Fantastic! What can you tell me about a price analysis?
Sally: Well, a price analysis is a set of methods for determining whether an asking price is
reasonable without examining the details of the cost or profit included in the price. I think this
means that every time we make a purchase, we consciously or unconsciously make a price
analysis, which satisfies us that what we are paying is reasonable.
Jake: That is very important information to keep in mind. I’m glad you shared that with me. I
will now explain the governmental aspect of the price analysis.
We see that the government does a significant amount of contracting based on price alone, with
no information on how much cost and profit are included in the price. Setting up a contract this
way often results in the awarding of a fixed-price type contract.
What do you think happens when a government agency needs to acquire various products and
services?
Sally: I think that the agency must forecast the price of those products and services in its budget
and convince the reviewing authorities that the forecast is reasonable. I recall that once the funds
are appropriated, the agency is in a position to actually buy the products and services.
Jake: That was a great response, and you are absolutely correct! I do have one more thing to add.
Keep in mind that the bids, price proposals, and quotes received by the government in response
to solicitations and requests for quotations must all be evaluated for price reasonableness.
© 2020 Strayer University. All Rights Reserved. This document contains Strayer
University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
Sally: I will definitely keep that in mind moving forward. What else can you tell me about a
price analysis?
Jake: I have plenty more to share with you about this topic! Let’s continue our discussion by
moving ahead in our tablet presentation a little bit.
Jake: It is important to understand that a price analysis must be completed when selecting a
contractor for the awarding of a firm-fixed-price or a fixed-price-with an economic adjustment
contract. When the government commits itself to a contract signature to pay a price, there isn’t
an opportunity to amend the price unless the contract work is changed.
Sally: That is very good to know! How do companies like SolarCal negotiate prices with the
government?
Jake: Well, here at SolarCal we use negotiations to reach a fixed-price type contract. We
normally hold discussions on the pricing and technical aspects of each offer in the competitive
range. We have noticed, however, that regardless of the size of the acquisition, the detailed cost
and pricing data are not sought if a determination is made that the awarding of a contract will be
based on adequate competition. For particular cases like this, we will use a price analysis to
assess the reasonableness of each proposed price.
Sally: That makes a lot of sense now. Thanks for explaining that to me!
Jake: Not a problem at all. We will now look at a number of methods for conducting a price
analysis.
Let’s begin!
Jake: The first method of conducting a price analysis is to do a comparison of the proposed
prices received in response to the solicitation. This method usually consists of comparing offered
prices against each other in order to decide which prices are most reasonable. We find that the
offered prices are fairly close together, but are not the same, if adequate price competition has
occurred.
Sally: Shouldn’t we be careful when using comparisons with other prices offered as the only
price analysis method?
Jake: Right you are! When there is an extremely low price that is compared to others, this may
indicate that the bidder did not fully understand the requirements or there was a mistake made.
Sally: I think I know another method that could be used! I’m looking at my tablet now; let me
share what I have found on the projector.
© 2020 Strayer University. All Rights Reserved. This document contains Strayer
University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
Another method of conducting a price analysis is a comparison of prior prices paid. The
presentation on my tablet says that this method is useful when the agency has had a history of
contracting for the same products or services. It also says that there are several factors that must
be considered, such as:
Reasonableness of the base price;
Time since the last buy;
Relative number of quantities sold;
Whether we are dealing with a special production item or a shelf item; and
Acquisition methods used.
Jake: Great job Sally, and thanks for showing me that method!
Let me tell you about a third price analysis method, which deals with the comparison of prior
quotes. This method is very similar to comparing a present offer to the prior prices paid for the
same item. However, this method will compare the present asking price to the prior quotes, and
not just the price paid.
Sally: There are two other methods listed on this tablet presentation. Can I show you the fourth
method?
Jake: Sure! After that, I will cover the last method of conducting the price analysis.
Sally: The fourth method of conducting a price analysis is to do a comparison of prices paid for
similar items. I recall that this method is similar to the one you previously discussed, except
now we have the added complication of comparing something similar rather than the same. It
seems that this can be a very imprecise method to use if you are comparing the prices paid from
several months or over a year ago. However, it seems that this method may be more precise if
you are comparing the price you paid recently for a similar item. I think the level of precision
depends on how accurately one can estimate the price change related to the differences in design.
Jake: Very good Sally! This method can be tricky if not done correctly. Now let’s look at the
final method we can use.
Jake: The last method that can be used to conduct a price analysis is the use of estimating
relationships. We see that federal acquisition regulations refer to this method as the use of “rough
yard sticks.” Keep in mind that estimating relationships refer to measures such as dollars per
pound for finished products and dollars per square foot for finished construction. The downfall of
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University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
this method is that you need to continually update estimating relationships so that they will retain
their usefulness. These relationships need to be updated in order to reflect the prices as they
gradually change. We see that many agencies experienced in buying complex items may develop
rough yardsticks for use in estimating prices, determining price reasonableness, or detecting
significant variations from estimates which justify further checking.
Sally: That is very interesting! I think I definitely have a better feel for the various methods of
conducting a price analysis.
Jake: That is great Sally! Please let me know if you have any other questions.
Jake: The first method of conducting a price analysis is to do a comparison of the proposed
prices received in response to the solicitation. This method usually consists of comparing offered
prices against each other in order to decide which prices are most reasonable. We find that the
offered prices are fairly close together, but are not the same, if adequate price competition has
occurred.
Sally: Shouldn’t we be careful when using comparisons with other prices offered as the only
price analysis method?
Jake: Right you are! When there is an extremely low price that is compared to others, this may
indicate that the bidder did not fully understand the requirements or there was a mistake made.
Sally: I think I know another method that could be used! I’m looking at my tablet now; let me
share what I have found on the projector.
Another method of conducting a price analysis is a comparison of prior prices paid. The
presentation on my tablet says that this method is useful when the agency has had a history of
contracting for the same products or services. It also says that there are several factors that must
be considered, such as:
Reasonableness of the base price;
Time since the last buy;
Relative number of quantities sold;
Whether we are dealing with a special production item or a shelf item; and
Acquisition methods used.
Jake: Great job Sally, and thanks for showing me that method!
© 2020 Strayer University. All Rights Reserved. This document contains Strayer
University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
Let me tell you about a third price analysis method, which deals with the comparison of prior
quotes. This method is very similar to comparing a present offer to the prior prices paid for the
same item. However, this method will compare the present asking price to the prior quotes, and
not just the price paid.
Sally: There are two other methods listed on this tablet presentation. Can I show you the fourth
method?
Jake: Sure! After that, I will cover the last method of conducting the price analysis.
Sally: The fourth method of conducting a price analysis is to do a comparison of prices paid for
similar items. I recall that this method is similar to the one you previously discussed, except
now we have the added complication of comparing something similar rather than the same. It
seems that this can be a very imprecise method to use if you are comparing the prices paid from
several months or over a year ago. However, it seems that this method may be more precise if
you are comparing the price you paid recently for a similar item. I think the level of precision
depends on how accurately one can estimate the price change related to the differences in design.
Jake: Very good Sally! This method can be tricky if not done correctly. Now let’s look at the
final method we can use.
Jake: The last method that can be used to conduct a price analysis is the use of estimating
relationships. We see that federal acquisition regulations refer to this method as the use of “rough
yard sticks”. Keep in mind that estimating relationships refer to measures such as dollars per
pound for finished products and dollars per square foot for finished construction. The downfall of
this method is that you need to continually update estimating relationships so that they will retain
their usefulness. These relationships need to be updated in order to reflect the prices as they
gradually change. We see that many agencies experienced in buying complex items may develop
rough yardsticks for use in estimating prices, determining price reasonableness, or detecting
significant variations from estimates which justify further checking.
Sally: That is very interesting! I think I definitely have a better feel for the various methods of
conducting a price analysis.
Jake: That is great Sally! Please let me know if you have any other questions.
Sally: Now that you mention it, I do have one more question. I remember from one of my
Strayer business classes that there were two other approaches to conducting a price analysis.
Could you refresh my memory?
Jake: Well, you are right – there are two other approaches that can be taken. The first approach
deals with the concept of a value analysis, which can give insight into the relative worth of a
product. The government may use this approach in conjunction with other price analysis
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University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
techniques. The major premise behind this approach is to learn why prices are different for
products of the same basic type and whether they are worth the difference.
Sally: Thanks for reviewing that with me. I think I remember what the second approach is now!
I recall that the second technique is visual analysis. This concept deals with looking at an item
and using our experiences to estimate its value. I remember that this is particularly useful when
making small purchases for repair parts and accessories, especially when they are only available
from one known source.
Jake: That is correct – great job, Sally! There is one more thing I want to share with you. Keep in
mind that federal acquisition regulations identify two preferred techniques as the best ways to
complete a price analysis. One technique is to do a comparison of proposed prices received in
response to the solicitation. The second technique then deals with a comparison of prior
proposed prices and contract prices with current proposed prices for the same or similar
items.
Sally: Jake, thank you for all of the details about how your department makes decisions on how
to price contracts with the U.S. Government and General Solar. You have really expanded my
knowledge, and your tablet presentation really helped me gain a better grasp on several key
pricing analysis concepts.
Jake: It was my pleasure, but keep in mind that there is a lot more that goes into these decisions.
We will save that for another day though!
I would now like for you to go through some interactive training materials to help build upon
some key concepts from today’s lesson.
Jake-A price analysis is a set of methods for determining whether an asking price is reasonable
without examining the details of the cost or profit included in the price.
Jake-A comparison of proposed prices received in response to the solicitation is a method of
comparing offered prices to each other to decide which are reasonable. As a general rule, we
would expect offered prices to be fairly close together, but not the same, if adequate price
competition has occurred.
Jake-A comparison of prior prices paid is a method that is useful when the agency has had a
history of contracting for the same products or services. Several factors must be considered,
including the reasonableness of the base price, time since the last buy, the relative number of
quantities sold, whether we are dealing with a special production item or a shelf item, and the
acquisition methods used.
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University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
Jake-A comparison to prior quotes is a method that is similar to comparing a present offer to
prior prices paid for the same item. However, it compares the present asking price to the prior
quotes, not just the price paid.
Jake-A price paid for similar items comparison is a method similar to comparing prior quotes
except now we have the added complication of comparing something similar rather than the
same. Comparing with prices paid for similar items in the past is a very imprecise method if you
are comparing with prices paid several months or a year ago. However, this method may be
precise if you are comparing to the price you paid very recently for a similar item. The level of
precision depends on how accurately you can estimate the price change related to the differences
in design.
Jake-Estimating relationships are measures such as dollars per pound for finished products and
dollars per square foot for finished construction. But you need to continually update estimating
relationships so they will retain their usefulness. Relationships need to be updated to reflect
prices as they gradually change.
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University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
BUS315 Week 1 SolarCal Case Analysis
Basic Pricing Policy and Concepts
Participants:
Sally- Intern
Dominic- CEO of SolarCal
Luke- Head of Productions
Jake- Head of Accounting/Finance
Melissa- Head of Government Contracting
Sally: Good morning everyone! I am Sally Smalls, the new SolarCal intern. I’m very excited to
be here and look forward to working with all of you!
Dominic: Good Morning Sally and welcome to SolarCal! My name is Dominic, and I am the
founder and CEO of SolarCal, I formed SolarCal five years ago, but before that I served as a
Navy pilot and dealt with several military operations.
Luke: Welcome to the team Sally! My name is Luke, and I am the head of productions here at
SolarCal. I have been with SolarCal for a little over two years and before that I worked for Apple
and Microsoft.
Jake: Hi Sally, it’s a pleasure to meet you! My name is Jake, and I’m in charge of the finances
and accounting here at SolarCal. I have been employed with SolarCal for over three years and I
have worked in Europe for several different financial institutions.
Melissa: I guess I am last. I am Melissa and it is my job to deal with all of the governmental
contracts that come through SolarCal. I have been with SolarCal and Dominic since it has been
founded. I served in the US Army and gained a lot of experience with military contracts and
audits. We’re all thrilled to have you on our team!
Sally: It is a pleasure to meet all of you! I can’t wait to get started and learn the ins and outs of
SolarCal!
Dominic: Welcome to the team again Sally! To start off, let me tell you a little about what we do.
When you came in this morning, I’m sure you noticed that you were greeted by security guards
that had to confirm your information before letting you through.
Sally: Yes! I wasn’t expecting to go through a security checkpoint when I first got here.
Dominic: Well, you see the work we do here is covered under a strict non-disclosure agreement
(NDA) and our security is not really set-up for visitors. I was concerned they would turn you
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University Confidential and Proprietary information and may not be copied, further
distributed, or otherwise disclosed in whole or in part, without the expressed written
permission of Strayer University.
away before you even had a chance to explain why you were visiting. You will be our first intern
and really our very first visitor.
Sally: Wow, I feel very privileged! Based on the security protocol, how did you hire the original
employees?
Dominic: That’s a good question! We had an outside agency conduct background checks on all
employees and conducted the vetting process. Once candidates were selected, we would conduct
int
