Price analysis is the investigation and appraisal of a price that is planned for particular good without considering the expenses incurred for each component that the product consists of and without looking at the revenue that it can generate. This can be done by comparing given estimates of cost for the product, by looking at price quotations of similar items, by using exchange rates for one good to another and by looking at the price it can be sold in the markets without considering the supposed cost for producing the particular product. This method is actually one of the means by which proposal analysis can be done and should ideally be involved in the scrutiny of contractor proposals. For example, when a company would like to manufacture airplanes instead of buying pre-formed ones and altering it for their purpose, price analysis would look at how the company can reasonably get the raw materials without being too costly such that it would be much too expensive compared to just buying pre-made ones.
Price analysis is important when making decisions of contract proposals when considering creating a product in a market with already existing buyers and sellers because it studies how much a product should be sold in the market. It is a way to ensure that the price given will be fair and reasonable in cases where the total cost of production is more expensive than the price the producer can sell it in the market realistically. Now, there are certain factors that need to be considered in this kind of analysis such as how many buyers and sellers there are in the market the particular good is being sold to, the cost of production as well as its quality, the demand, the available alternatives, possible profit gained on sales and the level of need for the product.
In doing price analysis, comparing the price estimation of different contractors is essential as well as contrasting previous prices and services for the same amount of work or materials that may use stock trading systems as a basis. It is also necessary to evaluate the goods that will be purchased in comparison to products or money of equivalent sum. Technical analysis is necessary to determine the breakeven point by means of price estimation and discussion of price summary. Deciding the most reasonable bidder in this case not only relies on the differences of provided cost offers but also the terms and conditions, but not before ensuring that the offers of contractors bidding for a particular service meet the basic requirements that the project asks for.
With the market being in a constant flux, policies regarding bidding for goods and services now focus on using price analysis to emphasize reasonableness and fairness. Thus, it is then deemed necessary for extensive research on pricing to maintain a competitive ground for contractors leading to optimization of possible utilization of services or goods for production.