How to Price a Public Sector Bid (Without Guessing)

A guessed price fails in both directions. Too high and you lose to a rival who did the sums - on a most-advantageous-tender award, price still carries real weight, and a strong quality answer cannot rescue an uncompetitive number on a heavily price-weighted contract. Too low and you win the work then discover the margin was imaginary, which is worse: you are now locked into delivering a public contract at a loss, on terms you cannot easily exit, sometimes for years.

The trap is that guessing feels efficient. Building the price up properly takes an hour or two the first time; guessing takes a minute. But the guessed minute routinely costs you either the contract or the profit, and the built-up price is reusable - once you have a costing model for your kind of work, every future bid starts from it. The discipline pays for itself on the second bid.

The only sound foundation for a bid price is your own cost build-up: what it genuinely costs you to deliver this specific requirement, before you think about anyone else's number. Work through it line by line, for this contract's actual scope and duration, not a generic day rate.

• ·Direct labour: the real hours by role, at the pay rate you will actually pay - including the real Living Wage where a buyer expects it, and any TUPE-inherited staff and their terms
• ·Materials, plant and subcontractors: priced for this job, with current supplier quotes, not last year's
• ·Overhead recovery: the share of your fixed costs (premises, insurance, admin, management time) this contract must carry - a contract that does not cover its slice of overhead is a hidden loss
• ·Delivery risk and contingency: a realistic allowance for the things that go wrong on this type of work, sized to the risk, not a token 5% on everything
• ·Contract-specific costs: mobilisation, compliance and accreditation upkeep, KPI reporting, social-value commitments you have promised and must fund

On top of a sound cost base sits your margin - the profit that makes the work worth doing. Set it deliberately: thin enough to be competitive on a price-weighted contract, healthy enough that the job is worth winning and you are not one bad month from delivering it at a loss. A margin is a business decision, not a plug to hit a target price, and if the only way to reach a "winning" number is to erode the margin to nothing, that is usually the tender telling you to no-bid.

Only once the cost-plus-margin price exists should you look outward for context. What did comparable contracts of a similar size and scope award at? Is there a published budget or a prior-contract value? This triangulation is a sense-check, not a price-setter: if your built-up price sits wildly outside the range, revisit your assumptions - but the comparable never overrides a sound cost build-up. Public comparables are also noisy (framework ceiling prices, contracts of a very different scale, values that include VAT and yours that does not), so weight them lightly and only where they are genuinely like-for-like. The price is your cost plus your margin; the market is the room you check it against, not the hand that sets it.

Here is the step that separates bids that win on price from bids that merely have a low price. Under the Procurement Act 2023, contracts are awarded to the "most advantageous tender" (section 19), and the GOV.UK guidance is explicit that value for money is "the optimal whole-life blend of economy, efficiency and effectiveness" - not the lowest number. That is your opening. A price presented bare is judged only on size; a price presented with a value-for-money case is judged on worth.

So show your working where the tender allows it. Explain what the price buys - the experienced team, the mobilisation that avoids disruption, the whole-life saving from doing it right once - and tie each claim to evidence, not adjectives. Where the buyer weights whole-life cost, make the whole-life argument; where they weight social value, cost your commitments in and say so. The aim is to make the evaluator read your price as good value against their outcomes, which is exactly the axis "cheapest wins" ignores.

This is the part of pricing BidSquirrel was built around. We help you assemble the costed breakdown from your own numbers - the cost build-up, the margin, the triangulation - and then draft the value-for-money narrative with you, grounded in the buyer's published criteria and your own evidence. The figures and the final words stay yours; what we add is the discipline and the argument that turns a price into a case. See how the pricing engine works on our methodology page, or try it on a live tender via pricing a bid.