In tenders and bids, pricing is critical. You need to maintain margins and generate a profit – whilst securing the contract. Our Sydney, Melbourne and Perth-based tender and bid writing experts will help you navigate the weighting criteria in government and private sector tenders across Australia to ensure your bid is professional and profitable!
As bid and tender writers, most of our time is usually helping clients with writing. We will also help you:
- Interpret questions related to pricing and draft a response.
- Analyse margins for government and private sector trends and generate pricing.
- Respond to questions on exchange rate, and other risks.
- Develop a pricing strategy that strikes the right balance between winning and profitability.
Call our team today to discuss your pricing strategy for your next bid. We have:
- Thirteen years experience assisting with pricing, estimating and pricing strategies for tenders.
- An in-house, finance degree qualified team with a 90% win rate.
- A comprehensive understanding of government tenders and the need to allocate margin for contract management.
What you need to consider when setting tender prices in 2026
When developing your pricing strategy and setting your prices, you should consider:
Many businesses looking for tender consulting services require assistance with pricing. Generally speaking, regardless of if you are in the construction, maintenance, defence, health or any other industry, you will need to take into account some core factors when formulating your pricing.
- The value of price vs quality from the buyers perspective. What weighting do they put on each and what is the weighting criteria for pricing stipulated in the tender. Federal, state and local governments in Australia all include a weighted criteria in their procurement documentation.
- What type of rates to our competitors charge? What is the ‘market’ rate and how do I rates fit within the market?
- Do our rates enable us to add additional value? How can we explain the additional value provided as a result of our pricing strategy?
- Does our pricing account for the additional compliance requirements normally associated with the government or private sector tendering and delivery process? Will we make a profit and have we considered the costs of reporting and other communication associated with servicing the contract? For example, in the construction sector, the level of compliance and communication associated with building a residential home in Sydney is a lot less than building a small public toilet block for a local Council.
How to calculate overheads for government tenders and the government contract profit margin benchmarks in Australia
There is no one-size fits all approach to calculating overheads for government tenders in Australia. Generally speaking, the margins are lower (between 8% and 15%) for government tenders than they are in the private sector. This is well known, particularly for professional services and construction bids. The key point is that you need to go through the scope in detail and include costs for reporting and contracts administration.
These need to be fed through to your pricing model to ensure you maintain a healthy margin throughout the contract.
Our team will show you how to answer pricing questions in a tender and guide you on the process.
Specialist tender pricing support for construction contractors in Sydney, Melbourne, Brisbane and across Australia
We are highly experienced in the construction sector and are able to provide support on pricing and pricing strategy. We are not estimators and are unable to price the construction component of the works. However, our team will provide assistance with:
- Pricing strategy for construction projects.
- Margins and pricing for contract management and safety and quality compliance.
- Pricing and quantifying social value initiatives.
- Identifying errors or challenges with your pricing and helping you overcome them.
In addition to the construction industry, we provide other assistance and support for businesses in pricing bids and tenders including:
- NDIS tender writing and pricing help.
- Cleaning contract tender pricing help.
- Strategies and support for pricing bids and tenders in the defence industry.
- Pricing for state government and local Council tenders including.
- Pricing strategies for professional services.
Our team works across all industries and will help you scope a contract, set your pricing and price to win (and profit).
Tender pricing strategies you can use to win government tenders in Australia and profit
There are many different tender writing strategies you can employ to win government tenders. Some of the strategies we help our clients employ include:
- Penetration pricing. This is generally a dangerous strategy that can lead to you winning contracts that are not profitable. It needs to be used with caution and in line with a larger overall strategy to penetrate the government market. Penetration pricing involves offering prices that are lower than your competitors and generally below market. Sometimes your lean business structure allows you to do this, whilst other times, it’s an overall strategy to win more contracts. For some building contracts, it’s the potential for variations that is attractive. Either way, a low pricing strategy can work in some scenarios.
- Market pricing. This is generally a logical strategy especially when you can back yourself to write a great compelling and persuasive tender response. Market analysis is critical and often in bids in Australia, they will provide an approximate contract value. For example, in Northern Territory government tenders you can see the value of previous contracts. Also, when bidding at market price, you give the buyer the single that you are a quality operator that is pricing to deliver a good outcome and that you have provisioned for the appropriate resources to be allocated. Sometimes a low price can trigger some scepticism in the mind of the procurement team.
- Price Skimming. This is where you price the contract as high as the market lets you. It generally results in you winning less work for high contract value. This strategy generally comes down to your resourcing. If you have limited resources and would need to engage additional resources to complete a project or deliver a service, you may chose this pricing strategy to cover any additional costs and ensure you operate at a high margin.
- Cost-plus pricing. This is a strategy that a lot of our construction clients in Australia adopt. We help them write the tender whilst they gather quotes from several different tradespeople. Once you have calculated your costs, you then add a margin for your profit. With this strategy you need to be careful. When you calculate your costs you need to factor in your project management as well as contract management costs. The costs of managing a government contract in terms of administration, communication and reporting are generally higher than a private sector contract.
Pricing and winning tenders and bids in Australia
When you are putting together your pricing, you need to ensure you communicate the value your pricing presents. Sometimes, having a higher price, with an explanation about how it can by a lower overall lifetime cost to the client when you consider the whole lifecycle.
Some points to communicate in your bid or tender (and explain in your pricing if possible) include:
- Talk about and showcase potential efficiencies. If there are specific efficiencies through your program, capability or even equipment, you should highlight these and explain how they enable you to provide more competitive pricing.
- Highlight decreased lifecycle costs. It may be your chosen use of materials, or doing something a more expensive way now that will save money in the future. Either way, you should explain these and clearly define savings. Talk about these and explain how the long-term savings in terms of maintenance outweigh the short term increase in costs.
How to understand your competitors pricing and positioning your business to win contracts
This is always a challenge as generally speaking, as you would, your competitors will keep their pricing confidential. However, in order to gather insights into your competitors pricing you can:
- Research the contract value for the previous tender. You can do this in the Northern Territory as well as some other states. They often provide insight into the overall budget in the specification document.
- Bid and enter the game. This helps as the more you tender the more you will receive tender feedback. This will give you insight into how your pricing rates against your competitors. Remember that if you are winning too many bids you may be pricing too low. In a tender debrief they generally provide guidance to you on your pricing.
- Analyse your competitor’s operations. This is also important. You can look at how your competitors operate in order to understand their costs which then drive their pricing.
Some other key points to consider when setting your pricing include:
- Is your pricing proportional to the volume of work? For example, if there is a potential high volume of routine work, you may want to price lower and find more efficiencies in your operation.
- Is there a new competitor that is undercutting everyone? If so, how are they doing it. You generally don’t want to enter into a race to the bottom.
- Is there any intel you can get on the costs of performing the work? Does the client have a reputation for being flexible and lenient. If so, factor this into your costs.
- Do you have a strong bid with solid experience and a track record that justifies a higher price?
- How do you fit in the market in terms of services provided? Are you a premium service provider? If so – you can price accordingly.
How do you set your price for a government tender?
In order to set your price for a government tender (or private sector for that matter) in Australia we generally recommend you:
- Understand your position in the market and how you fit-in relevant to your suppliers. Are you a quality provider, a budget option or something else.
- Review the specification and scope of the tender. Where there is insufficient detail and this results in uncertainty from a pricing perspective, you should go back and clarify (by asking questions through the portal). Often the incumbent provider has an advantage because they know the ins and outs of the contract. Clarifications can help limit this advantage.
- Identify areas where you can do things better – faster! These are two your advantage. If you are a demolition business for example, and your methodology enables you to decrease costs by completing the works quicker, then this is to your advantage and will enable you to be more competitive on price. It’s also important to keep your sub-contractors in check so there is no price creep from preferred sub-contractors.
- Forecast variable costs as best you can. This is always a challenge for longer term contracts which many panel appointments and tenders are. You need to quote at a price that has some buffer – in case variable costs such as wages, labour hire costs and materials (if applicable) increase. Factor this into your quote.
- Include your wider team. Sure – keep your pricing confidential. However, include your wider team in the discussion to identify any potential costs you haven’t factored in.
- Don’t price a tender or job you don’t have a reasonable chance of winning and deliver. It’s a lot of effort and you need to consider the opportunity cost of your time.
Don’t lose because of pricing. Call our experts for help.
Our team of bid writers based in Sydney, Brisbane and Perth can assist. We will work with you to understand and interpret the pricing questions and guide you on the pricing process. We can’t help you set your price as we do not have sufficient knowledge of your business, however, we can help you identify factors to consider when setting your pricing.
Contact our team of bid and tender writers today at info@thetenderteam.com.au or call our Director, Jason Cooney, on 0410 448 770.
Frequently Asked Questions: Pricing Your Tender for Success
Do I have to be the lowest price to win a tender with the Australian Government? Does the lowest price always win?
No. Price is a factor that impacts the evaluation criteria. The Government (state, federal and local) looks for value for money. Non-price experience, local content, methodology and other factors influence the outcome. Pricing is a key factor but not the only factor and here at The Tender Team, we have helped many clients win tenders and bids when they didn’t score the best on pricing.
What is “Weighted Pricing Criteria” and how can we score well for it? How does it work?
Most RFPs and RFTs have a weighted criteria. Pricing is usually between 30 and 50%. The rest is your technical capability. Your weighted pricing is your pricing score, adjusted for this percentage. Where your pricing is high, it’s important to justify it and explain it. Your technical response can support this.
Can we win a bid even if we have a higher price? How do we justify it?
Yes you can win a bid with higher pricing. You need to explain the whole of life cost of your proposal and how it will deliver value when they consider the entirety of the contract. For example, for a construction project this may be through:
- Lower maintenance
- Easier quality control
- Better safety outcomes
- Better contract management and associated savings.
What are the most common pricing mistakes in tenders in Australia and how can we avoid them?
Common mistake 1: Underestimating the contract management and compliance costs in government tenders. The reporting, safety requirements, audits and general contract management need to be priced in and are more onerous with government.
How to avoid this pricing mistake: To avoid this, you need to allow a margin to cover for these costs and scope out their expectations to ensure you have a buffer.
Common mistake 2: Pricing too low and not being able to deliver. This is sometimes a strategy to win variations in the construction industry. It’s generally a dangerous strategy.
How to avoid making this pricing mistake: Ensure you always allow a healthy margin and write a quality bid or tender so you can score well on the technical response.
Once we have submitted a price for a government tender in Australia, can we change it?
Usually no. If there is an opportunity for a BAFO, this is generally a chance to reduce your rate.
Can we find out what our competitors charge on their current and previous contracts?
Possibly. It depends on the state. If you are pricing NT (Northern Territory) Tenders, they are quite transparent and generally publish the tender award amount publicly. Depending on the portal, they often post the tender award amount as well as the name of the winning tenderer. These are usually through contract award notices. Competitor intelligence from employees and other industry stakeholders is also always helpful.
