How to price a government bid (and still make money)

Most small supply contracts go to the lowest acceptable price. Pricing well means knowing what has won before, knowing your true cost, and deciding how much margin to give up for a better chance of winning.

1. Start from what won before

For a repeat item, the most recent winning price is the strongest single guide to the next award. When we tested this on 3,064 DLA parts, hiding each part's latest award and predicting it from the ones before, the last winning price came within about 9% of the next one at the median, closer than averages of older prices.

2. Know your true cost

• Your supplier's price for your exact quantity.
• Shipping to the delivery point, if the terms make it yours (FOB destination).
• Packaging and marking the RFQ requires.
• Any fees, such as card or portal fees.

3. Choose how hard to compete

In that same test, bids priced relative to the last winning price would have won this often:

• About 5% under the last price: won roughly 8 in 10.
• About 1% under: won roughly 7 in 10, while giving up very little margin.
• About 2% over: won roughly 4 in 10.

4. Watch for traps

• A long gap: if the item has not been bought in two years or more, prices often move a lot. Price from a fresh supplier quote, not the history.
• A unit change: a price that jumps several times over between awards may be a box one time and each the next. Check the unit of issue.
• Quantity: a much larger or smaller order than usual can move the price.
• Your floor: never bid below your cost plus the margin you need, however tempting the win.

Sources

• DLA Internet Bid Board System (DIBBS)
• FAR Part 13, simplified acquisition procedures

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