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.
The operating decision
Define allowable cost categories, evidence, allocation rules, margin, audit rights, confidentiality and treatment of efficiency gains.
What to keep
Keep cost submissions, source documents where permitted, review notes, agreed adjustments and unresolved differences.
| 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. |
A practical limitation
The model requires trust and governance. It can create administrative work without value when definitions and decision rights are vague.
Related definitions: supplier qualification, strategic sourcing, landed cost.
