Price and Cost Analysis in Procurement Decision-Making: A Systematic Review of Techniques, Integration Frameworks, and Strategic Applications

Abstract

Price and cost analysis constitute fundamental pillars of strategic procurement and financial decision-making in contemporary organisational management. Despite their widespread application across industries, significant gaps persist in the systematic integration of these analytical frameworks within procurement ecosystems, particularly in developing economies where institutional procurement capabilities remain underdeveloped. This paper presents a comprehensive review of price and cost analysis techniques, examining their theoretical foundations, methodological applications, and integrative potential through the lens of Total Cost of Ownership (TCO) and Cost-Volume-Profit (CVP) analysis. Drawing on established management accounting literature and procurement theory, we synthesise key analytical approaches—including market benchmarking, should-cost modelling, activity-based costing, and cost-benefit analysis—into a coherent framework for procurement decision-making. The study identifies critical interdependencies between price reasonableness assessment and cost structure evaluation, demonstrating that effective procurement requires simultaneous deployment of both analytical modalities rather than sequential or isolated application. We further examine the regulatory landscape governing procurement analysis, including antitrust considerations, government contracting standards, and cost accounting regulations. The findings suggest that organisations adopting integrated price-cost analysis frameworks achieve superior procurement outcomes, characterised by enhanced supplier negotiation leverage, reduced total ownership costs, and improved risk mitigation. This paper contributes to the procurement literature by providing a structured taxonomy of analytical techniques and proposing an integrative model that links price analysis, cost analysis, and strategic contracting. The implications extend to procurement practitioners, policymakers, and researchers seeking to advance evidence-based purchasing strategies in both public and private sectors.