Pricing in Proposals is Really Important — Don’t Neglect It

In too many proposal efforts, price is an afterthought.  This is poor strategy because price is always important in a proposal to local, state, and federal governments, no matter what the Request for Proposals (RFP) might say.

Developing a winning proposal requires a winning price just as much as it requires an outstanding technical and management proposal.  The reason is simple.  If three companies submit proposals and they receive the following scores on a 100-point scale, which one will win:  91, 93, and 95?

Many would pick 95, but having the highest score does not guarantee that you will win the bid.  The government agency may determine that all three bids provide acceptable responses that address all the evaluation criteria equally well and choose the bid with the lowest price.  In fact, government agencies are very likely to make this kind of decision because they are under extreme budgetary pressure nowadays.

Price matters.  You can win on a technical proposal but lose on your price proposal.

In too many proposal efforts, price is what you do last.  This is a big and often fatal mistake.  Develop your price proposal as you develop the narrative portion of the proposal and make sure it tells the same story.

To develop a competitive price proposal, follow these three rules recommended by Marsha Lindquist, President of Granite Leadership Strategies, Inc.

Develop a sophisticated knowledge of your customer.

Of course, you will read the RFP 50 times to learn such basic information as the expected contract start date, contract duration, and other matters.  However, you must do you research to determine what matters most to the government agency in terms of pricing.  Study the agency’s award history, their procurement reports, and meet with agency officials to learn the role price plays in their bid decisions.  You should know your potential customer’s price predilections as well as you know their technical requirements.

Develop a sophisticated knowledge of your own company

Be realistic about your own company’s financial structure.  Perform a bottom-up analysis to determine your real costs and what constitutes a reasonable profit.  Seek competitive bids on important elements of your RFP budget such as supplies and services.  If you bid with expensive teammates, your budget may become noncompetitive.

Develop a sophisticated knowledge of your competitors

Use available resources such as the GSA Supply Schedule, Dun & Bradstreet reports, and other sources to determine your competitors’ pricing structures.  See what their past government contracts have been like in terms of pricing.  There is no substitute for dogged research.  Competitive financial intelligence probably is 80 percent data collection and 20 percent analysis.

Work your pricing early, get solid information about your government agency and your competitors, and develop a bid that is squarely within the agency’s price range so that you will be competitive.

If the RFP says that minimally qualified bidders with the lowest budget will win, resist the temptation to bid.  There always will be someone with a lower bid than you.  Only bid on RFPs that truly focus on best value where price is very important but not the most critical evaluation factor.