How to Price a Government Tender Without Losing Money

Most government contracts are awarded to L1 (lowest responsive bidder). That pushes suppliers toward aggressive pricing — and into losses when they forget the costs that sit outside the product price.

Build your bid price from the bottom up: landed product cost (including freight and GST as applicable), packing and forwarding, installation and training if required, inspection and testing costs, warranty support for the warranty period, payment delay cost, and the cost of the performance security (margin money or bank charges).

Payment delay is the silent killer. Government payment cycles commonly run 30–90 days from acceptance. If you are financing inventory at 12–18% annualised, a 90-day delay adds 3–4.5% to your true cost. Price it in, or arrange working capital before you quote.

Then map the evaluation method: for L1, your strategy is the lowest defensible price with compliant specifications. For QCBS, quality and past performance carry weight — do not race to the bottom if evaluation rewards credentials. For reverse auctions (common on GeM), set a walk-away floor before the auction starts.

Two safeguards: (1) compute your break-even before opening the auction or submitting, and write it down; (2) never quote below break-even to win a first order with the hope of renegotiating later — government contracts do not renegotiate.