10 Principles When Pricing Your Tender
We are often asked how to work out a tender price? But there is no straight answer because every tender is different. The fact is that a tender for the supply of furniture will have a different pricing structure to that of the supply of food for a government function. So to provide individual pricing techniques would be very difficult.
In general, there are ten points that must be considered when calculating price. These are:
- Price is king – ensure that you price your product or service as low as possible in order to stand a chance of winning a tender.
- Be precise; when the product supplied is R101-26 then state it in the tender response as R101-26 and not as R101-00 or even R102-00. Small differences like these can result in large amounts that can be lost, depending on the size of the tender.
- Ensure that all the costs of delivering the product is taken into consideration; double check your pricing – omitting something small can come back and bite you later on.
- Confirm prices of goods with your suppliers – prices can change very quickly due to increases in fuel prices or exchange rate fluctuations.
- Always remember to add Value Added Tax (VAT) at 14% to your price especially when it relates to Government tenders. Most tenders state that the price must include VAT.
- Ensure that all other applicable taxes are included in the tender price.
- The most important piece of advice on Pricing: never bid too low or too high;
- Bid Evaluation Committees are well informed and they will know if a bid is too low or too high;
- Bidding too low or too high might lead to a tender response being disqualified or marked as non-responsive;
- Pricing can be influenced by law as well – there are several industries in South Africa, such as the cleaning industry, which has minimum wages payable to employees;
- A suggestion is that if your usual mark-up is 25% then tender perhaps at 18% to 20%. Remember that you are going to save on direct costs as well as on other expenses such as advertising, telephone costs and much more. Use these savings to lower your price.
- Remember that in Government tenders you are going to be scored on your price and currently price counts for 80 out of 100 points for tenders less than R1 million and 90 out of 100 points for tenders with a value of more than R1 million. The bidder with the lowest price receives the most points.
To learn more about this and many other tender conditions please attend one of our How-to-Tender workshops. Tender Workshop dates are published on our website at www.how2tender.com.
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