How Much Should You Bid for a Government Contract?

The instinct is to hunt for the "right" number, as if the buyer has one in mind and your job is to guess it. Let that go. The right price for you is the one that covers your real costs to deliver this specific contract and leaves a margin worth having - and that number is yours to calculate, not the buyer's to conceal. Two firms bidding the same contract can have genuinely different right prices, because their cost bases differ.

So begin where every sound price begins: a cost build-up for this job. The direct labour hours at the rates you will really pay, the materials and subcontractors quoted for this scope, the slice of your fixed overhead the contract must carry, and a realistic allowance for the risk of the work. Our guide on how to price a public-sector bid walks through the build-up in detail. The point here is that the number starts inside your business, not in a guess about the market.

On top of the cost base, add the margin that makes the work worth doing. Then - and only then - bring in the outside context. If the buyer has published an estimated value or budget, treat it as a guardrail: it tells you the ceiling the buyer expects and roughly the scale they are buying at. If your cost-plus-margin price sits comfortably inside it, good. If it sits well above, either the buyer has under-budgeted or you have mis-scoped - both worth checking before you submit.

• ·A published budget or estimated value is a ceiling and a signal, not the number to quote - do not simply price to the budget
• ·Comparable award notices for similar-scale contracts give a rough range to sanity-check against - weight them by how genuinely like-for-like they are
• ·Watch the VAT trap: post-2025 thresholds and many published values are VAT-inclusive; compare like with like or your triangulation is off by 20%
• ·A framework ceiling price is not a market price - it is a maximum, and call-offs often land well below it
• ·If the only way to fit the budget is to erase your margin, that is the tender telling you to walk away, not to bid at a loss

The phrase "price to win" gets misread as "price low". It does not mean that. Pricing to win means pricing at the level most likely to secure the award given how the buyer will score it - which, under a most-advantageous-tender assessment, is rarely the lowest number. On a quality-weighted contract, the winning move is often a fair, defensible price paired with a quality answer strong enough to justify it, not a cut price that starves delivery.

The discipline is to hold two lines at once: competitive enough to score well on the price criterion, high enough to cover your costs and margin. Where those two lines cannot both be held - where being competitive means bidding below cost - the honest conclusion is that this contract is not economic for you, and a clean no-bid protects you from a win that hurts. Our bid or no-bid guide covers making that call before you have sunk days into the response.

Overpricing loses you the contract, which stings but costs you only the bidding time. Underpricing is more insidious: it can win you the contract and then cost you money every month you deliver it. Worse, a price the buyer considers abnormally low can be formally investigated - under section 19 of the Procurement Act 2023 a buyer may disregard an abnormally low tender, though only after notifying you and giving you a reasonable opportunity to demonstrate you can deliver at that price. Our guide on abnormally low tenders explains that process in full.

The safeguard against both failures is the same discipline: a real cost build-up, a defended margin, a budget-and-comparables sense-check, and a value-for-money case that lets a fair price win on worth. That is the model BidSquirrel builds with you - the costed breakdown from your own numbers and the value-for-money narrative from your own evidence, so the figure you submit is one you can both win with and deliver on. See it on our methodology page or try it via pricing a bid.