How to price a government IT tender

Pricing is where many small firms either lose good bids or win bad contracts. Public buyers can't negotiate the way private clients do, so the price you submit is usually the price you're held to.

Step 1: Understand the price model

Read how price will be asked for and scored:

• Fixed price for the whole job, or per milestone.
• Rates: hourly or daily rates for roles, sometimes against an estimated number of days.
• Ceiling price or capped time and materials.
• Unit prices: per user, per licence, per device, per month.

And how it's scored. A common method gives full marks to the lowest price and scales others proportionally. See how tenders are scored.

Step 2: Estimate the effort

Break the work into deliverables, then estimate days per role for each. Include the things people forget:

• Project management and reporting, often 10% to 15% of delivery effort.
• Meetings, governance and travel.
• Testing, including accessibility and security testing.
• Data migration and integration.
• Documentation, training and knowledge transfer.
• Warranty or hypercare after go-live.
• Responding to the buyer's security and procurement processes.

Step 3: Apply rates and margin

Use your real cost per day for each role, including overheads, then add margin. If the tender asks for rates, see day rates for public sector IT work.

Step 4: Add contingency for real risks

Contingency should reflect specific risks: unclear integrations, unknown data quality, dependence on the buyer's staff. On fixed-price work, 10% to 20% is common. On capped time and materials, the cap itself is your protection.

Step 5: Sense-check the total

• Published budget? If you're well above it, you're likely out. If you're far below, check you've understood the scope.
• Past awards. Look up what this and similar buyers paid. See using contract award data.
• Price scoring. Model how your score changes if you're 10% or 20% above the likely lowest bid. With a 30% price weight, being 20% more expensive costs about 5 points out of 100, which strong quality can outweigh.

Step 6: Fill in the form exactly

Use the buyer's pricing form, in the currency and tax treatment they ask for. Check sums twice. Inconsistent prices between documents can make a bid non-compliant.

State assumptions, if allowed

If the tender allows, list key assumptions, such as the number of integrations or the buyer's responsibilities. Some buyers treat assumptions or conditions as a qualified bid and reject it, so read the rules.

Common questions

Should I price low to win my first government contract?

Price for a margin you can live with. A loss-making first contract can strain a small firm, and your rates on it may be quoted back to you later.

Do government buyers negotiate on price?

Under many procedures, no. Some negotiated and competitive dialogue procedures allow it. Assume the price you submit is final.

What if the scope is too unclear to price?

Ask clarification questions. If the scope stays unclear, consider proposing a priced discovery phase, a capped time and materials model, or not bidding.