How to price a government tender without leaving money on the table

Pricing is where most tender bids go wrong — either too high (and you lose) or too low (and you win work that destroys your margins). The sweet spot is value for money: a price that reflects quality, manages risk, and gives the buyer confidence you can actually deliver at that price.

Value for money ≠ lowest price

This is the most important principle in government procurement pricing. The Commonwealth Procurement Rules define value for money as the best combination of quality, risk and price — not simply the cheapest option. Evaluators are trained to be suspicious of unrealistically low prices because they signal delivery risk.

Know what the market pays

Every government contract award is published — the winning supplier, the contract value, the agency. Before you price, research what similar contracts have been awarded for. Ask your AI: "What was the average awarded value for similar tenders last year?" or "Who won the last three contracts like this one, and at what price?" This contract award data is the most underused intelligence in tendering.

Pricing approaches

Cost-plus pricing

Calculate your actual costs (labour, materials, overheads, risk contingency) and add your margin. This is the safest approach — you know your floor price. The risk is pricing yourself out if competitors are more efficient or willing to accept thinner margins.

Competitive pricing

Price based on what you believe the market will bear, informed by award history and competitor intelligence. This can win more work but requires discipline — never bid below your actual cost of delivery, no matter how much you want the contract.

Whole-of-life costing

Many government evaluations assess total cost of ownership, not just the upfront price. If your solution has lower maintenance costs, longer asset life, or reduced operational burden, make that case explicitly. Whole-of-life costing often favours quality over cheapness.

Common pricing mistakes

Racing to the bottom. Winning a tender at a price that loses money is worse than not winning it. Every unprofitable contract consumes resources you could spend on winnable, profitable work.

Ignoring the weighting. If price is weighted at 20% and technical capability at 40%, spending all your effort on shaving price and neglecting your technical response is bad maths. Focus where the points are.

Forgetting variations and escalation. Government contracts can run for years. Factor in wage increases, material price movements and scope variation risks. A tight price that doesn't account for escalation becomes an unprofitable price by year three.

Not explaining your price. A price without context is just a number. Explain what's included, what assumptions you've made, and why your price represents value. Transparency builds evaluator confidence.

Use data to price smarter

AskTender gives your AI access to years of contract award data across all 8 Australian jurisdictions we cover. Before pricing your next bid, ask your AI what similar contracts have been awarded for — it's the closest thing to a market price guide that exists in government tendering. See our broader guide on how to win government tenders for the full picture.