Certified Professional Contract Manager (CPCM) Practice Exam

'Should-cost' refers to an estimate based on the efficiencies of seller methods. This concept involves analyzing the cost structure of a product or service by considering how it should ideally be produced or delivered if a seller were to use efficient processes, technologies, and labor. The 'should-cost' model takes into account the best practices and realistic outcomes rather than the seller's past performances or actual costs.

Using 'should-cost' analysis helps buyers to establish a benchmark for negotiations, assess whether a seller's price is fair, and identify areas for potential cost savings. It is particularly useful in competitive procurement environments where understanding the cost drivers can influence decisions and lead to better value for money.

Other options do not accurately capture the concept of 'should-cost.' A fixed price for all contracts regardless of scope disregards the nuanced analysis needed for pricing. An average cost calculated from historical data fails to consider the efficiencies and process improvements that can reduce costs. An estimate prepared solely by the seller lacks independent verification and may not reflect an optimal or efficient pricing strategy.