Open-book costing is a commercial arrangement in which a supplier shares agreed cost information so price changes or margins can be reviewed transparently. The contract determines what is open and how it may be tested.
How should a business apply Open-Book Costing?
Define allowable cost categories, evidence, allocation rules, margin, audit rights, confidentiality and treatment of efficiency gains.
What records support Open-Book Costing?
Keep cost submissions, source documents where permitted, review notes, agreed adjustments and unresolved differences.
Open-Book Costing: control and evidence
| Area | What the record should show |
|---|---|
| Control | Define allowable cost categories, evidence, allocation rules, margin, audit rights, confidentiality and treatment of efficiency gains. |
| Evidence | Keep cost submissions, source documents where permitted, review notes, agreed adjustments and unresolved differences. |
| Tradeoff | The model requires trust and governance. It can create administrative work without value when definitions and decision rights are vague. |
What should buyers verify about Open-Book Costing?
The model requires trust and governance. It can create administrative work without value when definitions and decision rights are vague.
