Issue Date: 
Thursday, January 31, 2019

2 items that determine tender pricing

Article by Werner van Rooyen

www.howtotender.co.za

31 January 2019

Many bidders that respond to tenders struggle when it comes to calculating a price for a specific tender. One of the reasons for this is that a large number of Small Business Owners are usually new to the tender process and therefore they lack the necessary experience to price their bids correctly.

Without getting into the fundamentals of accounting there are two basic items that determine your tender price. In fact, these two basic items should always be your guide when determining your price on the goods or services you sell.

The two items that determine pricing is:

  • Direct Costs; and
  • Indirect Costs.
  1. Direct Costs

Direct Cost is the cost that one pays to either:

  • Produce goods or services; or
  • The cost price you pay to procure goods or products that you will resell to your customers.

In other words, if you manufacture wooden chairs your Direct Cost will be the money you spend on purchasing the wood for the chairs. Other Direct Cost in manufacturing wooden chairs would be wood glue, nails and labour costs.

Thus, when responding to a tender you must take the utmost care that you include all your Direct Costs in your tender price.

  1. Indirect Costs

Indirect Cost is the expense that you have to incur to run your business and these costs do not necessarily generate any income. Some of the most common Indirect Cost that your business incurs will be:

  • Rent
  • Utility expenses such as electricity and water
  • Telephone
  • Stationary
  • Salaries and wages
  • Accounting fees

It is very important to include Indirect Cost in your tender price. Remember that the tender will form part of your normal day-to-day business and therefore it must contribute to your Indirect Cost.

The question is how to calculate how much of the Indirect Cost is contributable to the tender. There isn’t one specific rule but one of the more common rules is to estimate the time spend on servicing the tender and then use that to factor in the Indirect Cost into the tender price. In other words if you have to spend 50% of your time servicing the tender then 50% of your Indirect Cost should be part of your tender price.

To learn more about this and many other tender conditions attend our “Become a Tender Expert” 2-Day workshops presented in Johannesburg, Pretoria, Durban, Port Elizabeth and Cape Town. Book and pay online at www.howtotender.co.za. Please contact Estelle at Estelle@howtotender.co.za should you require more information.

This article was written by Werner van Rooyen, Director of HowToTender (Pty) Ltd which specializes in tender consulting and tender training.

Title Closing Date Tender No.
The manufacture, supply, delivery to site, installation and commissioning of one passenger lift, guide rails, operating system and maintenance contract for Olifants River Resources Development Project at De Hoop Dam. 2019-06-06 11:00 DWS04- 0419 WTE
Appointment a pool of suitably qualified service providers to provide Interpreting services in QAA-Schools Sub-unit for a period of three years (36 months) 2019-05-17 12:00 RFQ- 0002
Supply and delivery of stainless steel grade 340 L for a period of 24 months to construction central 2019-06-06 11:00 DWS05- 0419 WTE
Procurement for Opentext Software License and Maintenance and Support on Behalf of the Western Cape Government Department of the Premier for a three (3) year period 2019-05-09 11:00 RFB1872/ 2018
Port Elizabeth: Alternative accommodation for Ibhayi Local Office: SASSA. 2019-05-14 11:00 LSPE05/ 2019
Appointment of a mechanical service provider to provide maintenance and general mechanical work at SITA Gauteng and other sites. 2019-05-15 11:00 RFB 1921/ 2019
Calvinia Department of Home Affairs: Alternative office accommodation: 415.88m² and 5 parking bays for a period of 5 years. 2019-05-22 11:00 LS07/ 2019
Calvinia Statistics South Africa: Alternative office accommodation: 320.45m² and 10 parking bays for a period of 5 years. 2019-05-22 11:00 LS03/ 2019
Appointment of a Group Life Insurer 2019-05-22 11:00 RFP 10/ 2019
Procurement of 2 PSIRA grade A armed close protection and 4 grade C static security guards at Mafikeng North West Public Works offices for the North West administrator for the period of 15 months 2019-05-14 11:00 HP19/ 001GS
Appointment of a Travel Management Company to Provide Travel Management Services and accomodation to the South African Police Service:Domestic and International for a period of three (03) years 2019-05-22 11:00 19/ 1/ 9/ 1/ 53 TP (18)
KZN: Department of Education: eThekwini Region: Verulam: Cottonland Primary School: Repairs and Renovations 2019-05-22 11:00 ZNTD 04634W
KZN: DOPW: eThekwini Regional Office: Mayville Complex: Rendering of Security Services within the complex, vacant land between Gazzela and Piedmont Road for a Period of Thirty-Six (36) Months (3 years). 2019-05-22 11:00 ZNTD 04762W
Appointment of a Service Provider for the Leasing of Office Space [Pretoria] for a Period of Five [5] Years for Groenkloof National Park 2019-05-17 11:00 GNP- 057- 18
Pretoria: Leasing of Office Accommodation of 30 223 square meters and 1 584 parking bays usage by the Department Home Affairs for period of 5 years in Pretoria CBD 2019-05-14 11:00 PT19- 002
Appointment of a professional technical expert to advise the Energy Regulator on the prudency of asset acquisition in Transnet SOC limited’s new Multi Products Pipeline project for a period of seven (7) months 2019-05-09 11:00 NERSA/ 1920/ PPT/ PAA/ BID001
Pretoria: Leasing of Office Accommodation of 18 873.86 square meters and 454 parking bays usage by the Department of Correctional Services Head Quarters for a period of 5 years in Pretoria CBD and the outskirts 2019-05-14 11:00 PT19/ 001
Appointment of a service provider to undertake the ex-post regulatory impact assessment of all Energy Regulator decisions and stakeholder perception/ satisfaction survey 2019-05-09 11:00 NERSA/ 1920/ RAR/ RIA/ BID002
ICT Research Support Membership for a period of 36 months 2019-05-24 12:00 DPME 05- 2019/ 20
Appointment of a Service Provider to Render Organisational Work-Study Services for a period of six (6) months 2019-05-23 11:00 NCC/ 04/ 2018/ 19

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Extension of validity period

By Werner van Rooyen

www.howtotender.co.za

31 January 2019

Those of you who are familiar with responding to tenders will know that it is common practice for procuring entities to extend the bid price validity period. We received the undermentioned queries regarding the extension of the validity period of the bid price.

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