Determining the Best Price Analysis Method Sandra Greene BUS 315 Dr. Lena Maslennikova 27 Oct, 2012 Determining the Best Price Analysis Method Every adult that has purchased items, whether big or small have conducted price analysis. Price analysis is simply price comparison. When people go to the store to purchase something and compare the price of different brands of the same item, they are conducting price comparison. In doing the price comparison people are not concerned with the costs that went into making the product or how much of a profit the company made off of the product.
The government also conducts price analysis. They “examine and evaluate a proposed price without evaluating its separate costs elements and proposed profit” (Murphy, 2009, p. 29). There are several different methods that can be used for price evaluation or price comparison. However, the one that is best in a variety of situations is Comparison of proposed prices received in response to a solicitation or more simply put, Comparison of competitive bids.
Of the different pricing methods reviewed, prices set by law or regulation are the only ones that comparison of competitive bids cannot be used for because those prices are already set. However, comparison of competitive bids can be used in place of all of the other methods. For instance, comparison of prior quotes is used when time is of the essence. It is used when it would be faster to compare previous quotes (within 24 months) then to take the time to go through the competitve bidding process. Still this is a case where comparison of competitive bids could be used.
Those concerned would just have to speed up the process. Comparison of published price lists, market data, and government estimates are other methods that can be used because they help to determine market price for products, as long as they are not being substantially discounted (Murphy, 2009, p. 38). The prices are readily available because they are in some type of catalog or use experts in the area, as long as they have up to date information. Yet, comparison of competitve bids could be used in those situation as well. In fact, competitive bidding might yield better prices (Murphy, 2009).
Comparison of similar items and rough yard stick comparison are difficult to start with. Adding and subtracting dollar amounts based on the similarities and differences cannot be exact. Estimations are just that, estimations. They would be good for getting a general idea of what the price should be, but competitive bidding would be better than “guesstimating”. Those are just a few of the many ways of analyzing the price of a product or service. Although those methods may have their uses, they cannot all be used in most situations, except for comparison of competitive bids. Competitive bidding is aimed at getting the products or services at the lowest price by stimulating competition and preventing favoritism” (Competitive Bidding, 2012). As long as the competition is fair and independent competitive bidding should yeild fair and reasonable prices. In most cases those prices should be better than estimations because the offerers want the business. In fact, a lot of times a firm will bid low, to their detriment, in an attempt to win an award. Ideally, the greater the number of offers received, the greater the competition and more often than not, the better the pricing.
Thus competitive bidding is not only of greater use, it is also more lucrative and therefore best to use in a variety of situations.
References Competitive Bidding. (2012). Retrieved from Business Dictionary: http://www. businessdictionary. com/definition/competitive-bidding. html Murphy, J. E. (2009). Guide to Contract Pricing. Virginia: Management Concepts, Inc. Procurement. (2011, March 7). Retrieved from Woods Hole Oceanographic Institute: http://www. whoi. edu/procurement/page. do? pid=14500 .