Certified Professional Public Buyer (CPPB) Practice Test

What is the primary purpose of a cost analysis?

1. A. compares prices from alternative suppliers

2. B. attempts to protect reasonable cost in benefit analysis

3. C. helps determine the supplier's costs actually incurred for nonstandard items

4. D. assists with defining functional requirements

The correct answer is: C. helps determine the supplier's costs actually incurred for nonstandard items

The primary purpose of a cost analysis is to help determine the supplier's costs actually incurred, especially for nonstandard items. This involves examining the various components of the supplier's costs to ensure they are reasonable and align with expected pricing for the goods or services being procured. Understanding these costs is essential for effective negotiation, ensuring fair pricing, and maintaining budgetary constraints. Cost analysis plays a critical role in the procurement process, particularly when items or services do not have a standard market price. By focusing on the supplier's incurred costs, public buyers can identify areas where cost savings can be realized or where pricing may not reflect the true costs of provision. This level of scrutiny also enhances accountability and transparency in the procurement process, ensuring that public funds are spent wisely and effectively. In contrast, comparing prices from alternative suppliers is more aligned with price analysis, which doesn't delve into the specifics of incurred costs. Protecting reasonable cost in benefit analysis relates to an evaluation of overall benefits derived from an expense, rather than a detailed review of the supplier's costs. Defining functional requirements primarily pertains to outlining what is needed from a product or service output, rather than the cost component.