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Cost Principle
Regulatory principle used to
determine the allowability of incurred costs for
the purpose of reimbursement under the
provisions of the contract.
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Cost Realism
A factor considered during cost
analysis of a proposal to determine if the
costs proposed are realistic in light of
historical experience, costs on similar
projects, market conditions over the life of the
proposal, or other factors.
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Cost Reduction
A reduction generally realized
when a manufacturer is able to lower the
material or labor costs used to make its
products; interchangeably used to indicate a
lower price paid by the buyer from what was
previously paid. See also: Cost Saving, Price
Reduction.
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Cost Saving
A realized and measurable
reduction in material, resource, or labor
expense(s) associated with the production
and delivery of an item or service. Primarily
associated in the manufacturing of an item;
interchangeably used to indicate a lower price
paid by the buyer from what was previously
paid. See also: Price Reduction, Cost
Reduction.
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Cost Sharing
A type of contract that is used
when it is impossible to firmly estimate costs
and there is a high probability that the
contractor will receive a substantial current or
future commercial benefit. This type of
contract may be used in research and
development areas, as well as public-private
partnerships.
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Cost, Insurance, Freight (c.i.f.)
A quoted price that
includes marine insurance in addition to the
cost of the item and transportation charges to
destination; commonly used when shipping
via ocean freight.
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Cost, Original
The original cost for which a good
or service was acquired; for equipment
purchases, this may include shipping,
installation, and other associated costs.
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Cost-Based Pricing
A method in which a fixed
sum or percentage of the total cost is added
as an income or profit to the cost of the
product to arrive at its selling price.
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Cost-Benefit Analysis (Study)
A process that adds
up the benefits of an action, good, or situation
and then subtracts the associated costs. The
resulting figure is used as a comparison for
alternatives to determine if the cost is a better
value or benefit to the entity.
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Cost-of-Living Adjustment (COLA)
An increase in
price or benefits to counteract inflation as
determined by a standard, pre-agreed-upon
index.
