How to Price a Government Tender Response

Value for money is not the cheapest price

The Commonwealth Procurement Rules require agencies to consider value for money, which explicitly includes quality, fit for purpose, and whole-of-life costs — not just the upfront price.

In a tender with a 20% price weighting and 80% quality weighting, a response priced 10% below yours but with significantly weaker quality sections will score lower overall. Price your work to reflect the quality you're delivering, then explain why it represents value.

Understand how price is weighted

Before you price your bid, check the price weighting in the evaluation criteria. This tells you how much of the total score comes from price. A 15% price weighting means price matters, but less than many other criteria.

Common price weightings in Australian government tenders:

• •10–20%: Price is a minor factor. Compete on quality. Don't underprice yourself.
• •30–40%: Price and quality are both significant. Price competitively but not at cost.
• •50%+: Price is a dominant factor. You need to be competitive to win, but don't win unprofitably.

Build your price from the bottom up

The most common pricing mistake is working backwards from a 'what will win' number. This leads to underpricing and contract losses. Instead, build your price from actual costs:

• •Direct labour: hours × real cost (including on-costs, superannuation, leave)
• •Materials and consumables at market rates
• •Equipment and plant hire or amortisation
• •Subcontractors at their actual cost to you
• •Overheads: your share of office, insurance, admin, and management
• •Margin: your profit, typically 15–30% for services, lower for high-volume supply

Justify your price in the response

Don't just submit a number — explain what it buys. Government assessors are looking for transparency and evidence that you understand the scope. A price justification section that itemises your approach builds confidence that you've read the RFT and can deliver.

Include: a cost breakdown (at least at component level), your rate card or daily rates, what's included and excluded, and a statement on how your price delivers value over the contract term.

Avoid the common pricing traps

Pricing mistakes that cost small businesses government contracts:

• •Pricing too low to win, then cutting corners on delivery — this destroys your reputation and future bid chances
• •Forgetting GST: government contracts are typically GST-inclusive unless stated otherwise
• •Not pricing for variations: include a day rate or variation mechanism so cost overruns are recoverable
• •Ignoring the transition period: contracts often require a mobilisation phase that costs money before revenue starts
• •Not checking if the agency has a budget cap — submitting above an undisclosed ceiling is a wasted effort