Price is part of nearly every federal evaluation, and in some competitions it is the deciding factor. Yet pricing is often handled at the last minute, separate from the technical team. Strong price proposals are built alongside the technical approach, grounded in realistic costs and presented exactly as the solicitation requires.
This article covers general principles. Pricing involves accounting, tax and legal considerations, so talk to an accountant or advisor experienced in government contracting for guidance specific to your firm.
Start with the solicitation’s structure
The solicitation usually tells you how to present your price: contract line items, labor categories, pricing templates, option periods and any required supporting data. Follow it precisely. Pricing templates that are altered, incomplete or inconsistent with instructions can create problems in evaluation.
Note the contract type as well. A firm-fixed-price contract puts cost risk on you, while a time-and-materials contract fixes hourly rates. Cost-reimbursement contracts require detailed cost proposals and adequate accounting systems.
Build from the technical approach
Your price should reflect the work you described. If the technical volume proposes a certain staffing level, the price should support that staffing. Inconsistencies between volumes are a common weakness. Evaluators may flag a technical approach as unrealistic if the price cannot support it, or question a price that includes labor the technical volume never mentions.
Work with the technical team to agree on a basis of estimate: the labor categories, hours, materials, travel and other costs required to perform, with the assumptions behind them.
Understand price analysis and realism
Contracting officers must determine that prices are fair and reasonable. Depending on the procurement, they may also evaluate price realism, especially in fixed-price competitions where the solicitation says so, to assess whether a low price reflects a lack of understanding of the requirement or creates performance risk. On cost-reimbursement contracts, cost realism analysis is used to estimate the probable cost to the government.
In practice, this means a very low price is not automatically an advantage. If your price looks unrealistic, it could hurt your evaluation.
Common pitfalls
- Leaving out costs such as transition, recruiting, travel or required insurance
- Ignoring wage determinations or fringe benefit requirements on covered service contracts
- Not escalating labor rates across option years
- Arithmetic errors or inconsistent totals between templates and narratives
- Pricing to win at a level that would be unsustainable during performance
- Failing to include pricing narrative or assumptions the solicitation requires
Review price like any other volume
Include price in your review process. A separate reviewer should check calculations, compare the price with the technical approach and confirm compliance with instructions. Leadership should review the overall price and margin before the final decision to submit. A price that is competitive, realistic and clearly explained gives evaluators confidence, and confidence is often what separates close competitors.