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December 7, 2020

How to win tenders by right pricing strategy

Pricing the tender will be one of the most critical and difficult tasks you'll face during the tender response process (pricing the bid). There is no simple answer to what the price should be since each tender is unique. 

You could have to bid for contracts by sending a tender if you offer products or services to other companies or the government. While value for money is an important consideration in tender bidding strategy, how you price your bid will determine whether you win the bid or lose.

While price is significant, your potential customer will be looking for a variety of other things, including your ability to meet their operational needs and your environmental credentials. The more information you have about specifications ahead of time, the better you will be able to tailor your tender strategy accordingly.

This guide to tender pricing addresses the most common issues when attempting to win a contract and gives you insight about how to win tenders!

What is a tender pricing strategy?

A tender pricing strategy is a strategy elaborated by a business to set a tender price based on specific information related to a project that has been provided by a procurement authority in an invitation to tender (ITT). The tender price set by the supplier specifies the price at which he is willing to supply the necessary goods and services or do the work needed. 

The ITT usually provides the necessary information to allow suppliers to accurately set their tender price such as: 

  • A letter of invitation to tender 
  • The form of tender
  • The form of contract 
  • A drawing schedule 
  • A tender pricing document 
  • Preliminaries 
  • Specifications 
  • Design drawings 

Different tender pricing strategies

MEAT Method

Most Economically Advantageous Tender (MEAT) is a tender that is graded or rated based on both price and quality. Consider the following scenario:

  1. The emphasis is on low prices, with 70% of the price and 30% of the quality.
  2. The emphasis is on high quality, with 30% of the price and 70% of the quality.

To win the tender in example (1), you will need to be really competitively priced; this isn't always the case in example (2). 

Cost-Plus Pricing 

Cost-plus pricing is a widely used pricing strategy. To arrive at the sale price, you add all expenses together, and add your margin (e.g., a percentage markup). After that, you can see how the rates relate to the competition while still making a profit. It's a safe place to start when pricing tenders.

Value-based pricing 

Selling at a price that consumers are prepared to pay is known as value-based pricing. It could be more expensive than cost-plus. Especially if you're selling a high-end, limited-edition item that's in high demand. Although it may be less expensive than cost-plus in a commoditized sector. You may need to check the expenses, overheads, or income in that situation.

In a tender, value-based pricing can be used to find places where you can charge more money. When you know the benefit to the consumer is greater than cost-plus, for example.

Marginal pricing 

The concept of marginal pricing is based on variations in output levels. This is a complicated topic with several variables. Setting the price to cover the additional expense of generating an extra unit of production, plus a profit margin, is a good example. When looking at spare capacity within your fixed overhead framework, you may want to consider marginal pricing.

Economies of scale are cost savings that occur as a result of higher outputs or a larger scale of activity. You may be able to negotiate a lower unit price if you sign a high-value long-term deal.

How do you bid for tenders?

A tender is a formal offer, also known as a deal, made in order to win a contract. One of your current customers may ask you to tender for work, requiring you to fill out a tender form, or you may need to apply for public sector contracts in order to expand your company. Tendering is the most popular method for a customer to find a supplier of products or services. 

The tendering process is a formal process that includes a rigorous screening process, bidder expressions of interest, the request for tender, and the evaluation process in order to be fair and transparent.

A tender document (ITT) is a document that explains how you can deliver the contract, including the technical solutions and pricing proposals. To show why you are the right candidate for the contract, the organization must have high-quality, compelling narrative responses. This is your chance to differentiate yourself from the competition and prove that you are the best company for the job. After that, the buyer will shortlist the most eligible bidders before picking a winning tender.

How do you win a tender?

You will be assessed on both price and quality as part of the procurement process so that the buyer can make an informed decision on who is best to execute the contract during the selection process. There is no room for error, and the tender process must be completed correctly.

Please keep in mind that your bid documents will be judged on more than just the lowest price; they will also be judged on the content of the narrative portion of the invitation to tender documents.

After you've submitted your tender bid to the contracting authority, they'll evaluate your financial and quality elements against the marking requirements, as well as the submissions of your rivals, to determine whether you're on the short list. Whatever the result of your submission, you can ask for feedback to help you progress or figure out why you got a low grade.

The judge will typically generate a scorecard of all tender responses so you can see where you stand in the assessment process. If you have earned high marks on certain topics in your contracts, save your answers in a bid library to help direct potential tender processes.

How is tender value calculated?

A manufacturer or producer is often asked to request a tender or cost estimate for potential product supply. Quotation Price or Tender Price is the price quoted for future supply. This price is determined based on a previous cost sheet or output account.

The items of previous cost elements are regarded with due consideration for anticipated adjustments in the future when determining expected cost in the future. To determine the tender price or quote, the estimated cost is multiplied by the desired benefit.

Tenders of Similar Type Commodity

When calculating the cost of a product of the same form and quality, the cost per unit of each cost factor is usually taken into account. If these elements are expected to adjust, the change will be made accordingly.

Tenders for Different Products

The cost of direct content, direct labor, and other direct expenses will be determined when determining the tender or quotation price for a different product. The cumulative cost of all of these would be prime. 

On the basis of absorption rates, work overheads, office overheads, and sale overheads will be applied. Normally, job overhead is paid or consumed as a proportion of salaries. As a result, the percentage is determined using historical data.

5 Tips to price tenders

Only you and your marketing team will know what a winning price looks like when it comes to the price you want to offer. Here are a few pointers to help you grasp the most relevant price considerations:

  1. H3: Know what they are asking!

Make sure you've read the pricing tender request and know exactly what the tender issuer is asking for. The tender response may request that you break down your pricing table into labor costs, hourly rates, material costs, and so on. Your tender will have no chance of winning if the price you submit does not follow the pricing response requirements.

  1. H3: Only take on tenders you can win!

If the tender request is too demanding for your business, or if you don't believe you'll be able to win it, don't waste your time and effort. It's not worth your time if the tender is clearly asking for too much or isn't consistent with your company's strategies and objectives. The tender must be a good match for your business.

  1. H3: Emphasize value!

Even if it's anything small, emphasize any added value that comes with your price. If there's something else you might add that's not included in the price, for example, a one-hour free consultation for a building and construction company or a bonus window cleaning for a cleaning company, let the tendering company know the importance and advantages of your business compared to your competitors.

  1. H3: Clarity!

Your pricing should be thoroughly clarified. Some tender response timelines are a little hazy. It's always a good idea to explain something that doesn't make sense, whether it's because the tender issuer doesn't understand your company or because it's an error. 

Make sure you explain everything that affects the price. For example, if you're bidding on a construction project and you're only doing half of the work on site, your answer should explicitly state that your price is focused on on-site work.

  1. H3: Firm costings!

Confirm the prices of products with your suppliers and subcontractors if your company has them, as prices will change (also due to increases in fuel prices or exchange rate fluctuations).

Need help?

Tender opportunities in Canada are now much easier to find thanks to the Internet. Aloha Tenders notifies you of all relevant public tenders for your company, allowing you to seize any opportunity. 

Here are the various benefits and features available on our platform:

  • Access to Quebec's, Ontario's, and Canada's public markets
  • We make it easy for you to find the most appropriate Canadian and American prime contractors' public tenders. 
  • Artificial intelligence (AI). This is where our main expertise comes into play: our powerful algorithms are constantly optimizing the precision of your research in order to prioritize the best opportunities!
  • It's easy to use and it's all in one place. Our platform can save you time by allowing you to navigate in a centralized and intuitive manner. You'll choose a set of keywords, and we'll set up the platform so that only the most relevant results appear. Finding the right opportunities has never been easier!
  • Emails containing routine rundowns. In addition to an elegant and efficient site, you will receive a daily email summary of tenders relevant to your business.

If you are interested in Aloha Tenders to optimize your opportunities, then contact us here and be sure to click here to begin your free trial!