Certified Professional Public Buyer (CPPB) Practice Test

What is the primary purpose of a cost analysis?

1. To establish contract terms

2. To review and evaluate cost data

3. To negotiate terms with the contractor

4. To determine project timelines

The correct answer is: To review and evaluate cost data

The primary purpose of a cost analysis is to review and evaluate cost data. This process involves examining the various elements of costs that are associated with a proposed contract or project. The review is crucial for ensuring that the costs put forth by a vendor are reasonable, justifiable, and aligned with market standards. Through cost analysis, public buyers can verify that the cost estimates presented reflect the true expenses required to perform the work as outlined in the contract. This helps to prevent fraud, waste, and abuse of public funds, as well as ensuring that the buyer receives good value for their investment. By analyzing cost data, one can also compare different proposals to find the most economically advantageous option. While establishing contract terms, negotiating with contractors, and determining project timelines are all important elements of procurement and project management, they are secondary to the initial understanding of the costs involved. Without comprehensive cost data analysis, these other activities may not be conducted effectively or may lead to unfavorable decisions. Thus, reviewing and evaluating cost data serves as the foundation for sound decision-making in procurement.