Pricing of government contracts is an essential element that determines whether you win or lose a bid. These two elements directly affect your business either positive or negative and it’s up to you to avoid the negative impact on the business. Accurate pricing of government contracts is highly encouraged through a detailed cost and price analysis in government contracts. Government through its agencies and relevant ministries conduct they own cost analysis and come up with the most probable cost position, and with this data, they counter check every bid. It’s always advisable not to be too greedy, that you over-price bids and not to be too lenient, that you end up to undercharging bids. The following are some basic ways to conduct a transparent government contract pricing.
1.Pricing to Win
Here, you’ve got to be clever and have the right pricing instincts of both the government and your competitors. Predict what you competitors are likely to offer the government as their prices, for the goods and services, and what the government is willing to pay for the same good and services. With a clear cost data, have your range of prices not too low nor too high. When bidding on government contracts, study the existing buyers by checking their past procurement. If the government or any of its departments have consumed the bided product or service recently, this should serve you an intelligent data to gain an advantage over you competitors.
2.Pricing to Profit
This pricing model involves considering your own expected costs in determining the suitable price for the government contracts. However, such form of government negotiations will require a high level of experience team. Consider involving qualified Certified Public Accountant in dealing with federal contracting. This team is tasked to set up the bid price, and if the price goes below the expected profit, avoid the entire bidding process. Not many organization can survive a massive loss in the name of “foot in the door” theory.
3.Fixed Pricing
Another type of government contract pricing comes in form of a fixed price. In that, winning an unprofitable bid is considered profitable than losing a profitable bid. In fixed pricing model, the cost incurred in preparing the bid is relatively low to warrant companies issuing higher prices for regularly purchased items. At later bids, the same companies can deploy low-priced bids. This model entirely depends on the price, for a winner to be determined.
So, bidders should issue their competitive prices on bids when drafting a cost proposal for government contract pricing. Bearing in mind, there are other negotiation factors other than prices, and this makes the procurement sourcing a bit flexible to all competitors. Such factors include delivery and payment scheme and terms of purchase.
