Cost Analysis

The Project Manager will review all proposed costs to determine that they are necessary, reasonable, and in compliance with applicable cost principles. The TxDOT Compliance Division (CMP) is available to assist in the analysis if requested to do so.
To review all proposed costs, the Project Manager should:
  • Ensure that all necessary costs have been identified in the proposal.
  • Review any justifications for the proposed costs.
  • Review each proposed cost element for necessity, reasonableness and consistency with the proposal.
  • Identify any cost element that requires more explanation or justification and that appears too high or too low.
  • Review subcontracts, when they are proposed, using the same steps.
See the following subsections for some guiding questions to assist the Project Manager in conducting a cost analysis of proposed costs to ensure that all budgeted items are deemed to be necessary and reasonable to carry out program objectives.
Salaries and Fringe Benefits
  • Are the number of staff and staff hours proposed consistent with operational requirements? If not, are they too high or too low?
  • Does the proposal contain a satisfactory rationale for determining the number of positions for each operational area?
  • If subcontracted staff is proposed, is it excluded from the proposer’s direct staffing? Has the proposing agency submitted a subcontractor’s proposal or other data enabling the analysis of subcontractor staff levels and costs?
  • Are position levels proposed commensurate with skill levels needed to carry out functions? Are they too high or too low?
  • Are the proposed rates consistent with prevailing area rates? If not, can the reasons for the differences be identified and justified?
  • Does the proposal break out the components of the fringe benefit package? Does the fringe rate package conform to the proposing agency’s policy, and is it made up of usual and reasonable components?
Travel Costs
  • Are local travel costs explained in the proposal? Are destinations, frequency, and distances identified? Are they necessary and reasonable?
  • Is the mileage rate for local travel consistent with the proposing agency’s policies as well as TxDOT’s travel policies?
  • Are out-of-town trips fully identified and justified in the proposal? Are they necessary and reasonable?
  • Are airfare, hotel and lodging costs consistent with the proposing agency and TxDOT policy?
Equipment and Supplies
  • Will any special equipment be needed? If so, will it be available for project implementation?
  • Does the proposal for equipment and office supplies provide an explanation for the budgeted items? Does the proposal describe the basis for its proposed unit costs? Is it historical or based on current price quotes?
  • Are the estimated quantity and/or unit prices reasonable and are the items necessary to fulfill project objectives?
Other Costs
  • Are proposed PI&E purchases necessary, reasonable and consistent with the proposal to carry out program objectives?
  • Where indirect costs are proposed, has the agency attached to the proposal an approved indirect cost rate or cost allocation plan? Are there costs included in the indirect rate that could be charged directly elsewhere in the proposal? If there is doubt, has the agency been requested to demonstrate how it allocated these costs and how it segregated direct from indirect costs? Does the approved rate cover the period of proposal and grant?
  • Does the subgrantee have a method of allocating costs which reflects the relative degree of benefit for all programs sharing the allocated cost (described in Chapter 3, Section 6)?
  • Where printing or copying of materials is proposed, does the proposing agency present any explanation and justification of the nature and quantity of materials to be printed or photocopied?
  • Are facility costs reasonable given the location of the facility and its proposed use? Are the costs of utilities and maintenance of the space broken out separately? If so, are these costs already included in the lease payment that the proposing agency will make and which it is already charging to the grant for the apportioned share of the space?
  • Are telephone, postage and insurance costs adequately identified in the proposal? Are they necessary, reasonable and consistent with the proposal’s problem solution?