Pricing – How to Price Your Bid Right!
Pricing is often the decisive factor when submitting a tender, but not always and it is not necessarily the most important element. After all, if you operate in a mature market in which there are multiple established operators it is likely that costings will be very similar across the organisations bidding for a piece of work. It is not uncommon for new entries to the market to try to underprice the competition but this approach is unsustainable and DKJ Support Services are aware of numerous firms who have paid the price for delivering services at a loss. Indeed, there have been high profile corporate collapses in the news recently with other notable providers delivering privatised public services under pressure and to tight margins.
So how do you price effectively? As a bid writing firm, this is not something we necessarily involve ourselves in as we take the view that you know your market and your costs better than we do. Nonetheless, there are a couple of factors to be aware of:
- What’s the weighting? 20% price, 30%, 40%? The higher the percentage, the tighter you should be on margins to ensure you are competitive. But don’t take a loss, there is no point delivering services for free.
- Check out T&C’s. Cancellation caveats might leave you out of pocket, or expenses might not be covered so you might have to travel at a loss. Factor this into your pricing.
- Is there a budget? Check the paperwork and see if there is a cost envelope. You should be around or inside this envelope but remember to keep it sustainable.
- VAT – the paperwork should specify whether or not pricing should exclude VAT and if it is not clear, ask a clarification question. All of your competitors will be wondering too!
If in doubt take some advice and double check your costs of delivery. Maybe you can find some efficiencies to ensure a contract is profitable but make sure you haven’t described something in the quality questionnaire section of the tender which you are later going to drop during service delivery. Always remember, nobody wants to deliver a service effectively for free or to take a loss. If you believe your organisation is as lean and efficient as it can be then you should have confidence in your pricing model and commit to those values which, even if you are not the cheapest, will make you close enough to ensure the quality section of the tender gets you over the line.
If you need any advice or support on any aspect of the bid process, feel free to contact us. We can provide as much support as is required by you from full management to a straightforward review prior to submission, we can help you deliver a winning bid.