Designing an Analytical Model for Determining Price Reasonableness in Contract Management: A Case Study of an ICT Company

Abstract

Discovering the fair and reasonable price, is one of the critical subjects in purchasing process, especially in imperfect markets, in which, market mechanism cannot be applied to judge about proposed price. To cover this gap, in this paper, an analytical model for analyzing the price in non-competitive markets, has been developed and step by step procedure in order to decide about proposed price, is presented. For this reason, all factors affecting the price, have been collected and divided in “Market condition”, “Internal characteristics” and “Nature of product” categories. In next stage, effect of each factor on cost items has been clarified and accordingly, it becomes explicit that how these factors can be used to analyze the cost items and discover the reasonable price. Finally, the proposed model has been applied in a governmental agency in ICT industry.

Keywords: Fair and reasonable price, Contract pricing, Cost and price analysis, Purchasing.