How to Price a Government Tender in Australia

Knowing how to price a government tender is where most businesses either win or lose. Price too high and you are uncompetitive. Price too low and you either cannot deliver or trigger an abnormally low tender review. Get the format wrong and you risk non-compliance.

Despite this, pricing is the least discussed part of tendering. Most guides focus on writing the technical response and ignore the commercial reality. This guide covers the practical mechanics of pricing government work in Australia.

How Government Agencies Evaluate Pricing

Pricing is never evaluated in isolation. Under the Commonwealth Procurement Rules, agencies assess pricing as part of the overall value for money assessment, which considers financial and non-financial costs and benefits.

In weighted scoring systems, price typically accounts for 20 to 40 percent of the total evaluation score. The remainder is allocated to technical capability, experience, methodology, and other assessed criteria.

This means a lower price does not guarantee a win. A response scoring 5 out of 5 on technical criteria and 3 out of 5 on price can beat a response scoring 3 on technical and 5 on price — depending on the weightings.

However, if your price is significantly higher than competitors and your technical score is only marginally better, you will lose. The value equation has to work.

Pricing Models Used in Government Tenders

Different procurement types use different pricing structures. Understand which model applies before you start calculating.

Fixed Price (Lump Sum)

You quote a total price for the complete scope of work. The buyer pays that amount regardless of your actual costs. This model is buyer-preferred because it transfers cost risk to the supplier.

Fixed pricing works when the scope is tightly defined and well understood. It is risky when requirements are vague or likely to change. If you are quoting fixed price on unclear scope, build in a contingency margin.

Schedule of Rates

You provide unit rates for defined activities or items, and the buyer pays based on actual quantities consumed. Common in construction, maintenance, and facilities management contracts.

The key risk is estimating volumes. If the buyer’s estimated quantities in the tender are significantly different from actual usage, your economics change. Review the volume assumptions carefully and price accordingly.

Time and Materials

You provide hourly or daily rates for personnel, plus agreed expenses. Common in consulting, professional services, and IT contracting. This model suits work where scope is uncertain or evolving.

Government agencies will benchmark your rates against market comparables. Rates that are significantly above market without justification will score poorly.

Cost-Plus

You are reimbursed for actual costs plus an agreed margin or fee. Used for high-risk or uncertain-scope work where fixed pricing is impractical. Less common in standard government procurement but used in defence and major infrastructure.

How to Research Market Rates

Pricing blind is one of the biggest mistakes in government tendering. You should know the market before you calculate your price.

AusTender Contract Notices

Every Commonwealth contract at or above $10,000 (GST inclusive) is published on AusTender with the awarded supplier name, contract value, and duration. Use this data to:

• Understand what agencies pay for similar services
• Identify incumbent pricing by looking at previous contract values for the same requirement
• Calculate implied daily or hourly rates from contract values and durations
• Track pricing trends over time

State portals — QTenders, NSW eTendering, Buying for Victoria — publish equivalent data for their jurisdictions.

Panel Rate Cards

If you are on a government panel, you have access to the agreed rate card. Your pricing for work orders under that panel must align with the rates you committed to at panel appointment. Review competitor rate cards where publicly available to understand your positioning.

Industry Benchmarks

Professional associations and industry bodies publish salary surveys and rate guides. While government rates are typically lower than private sector (margins of 8 to 15 percent are normal on government work compared to 15 to 25 percent in the private sector), these benchmarks provide a useful starting point.

Common Pricing Mistakes

Not completing the pricing schedule correctly. Government tenders include specific pricing schedules that must be completed exactly as specified. Entering figures in the wrong cells, omitting line items, or using a different format can result in non-compliance. Read the pricing schedule instructions carefully and fill in every required field.

Confusing GST-inclusive and GST-exclusive. Federal procurement thresholds are GST-inclusive ($125,000 for goods and services). Many state thresholds are GST-exclusive ($250,000 in several states). Pricing schedules will specify whether figures should include or exclude GST. Getting this wrong is a compliance failure that can disqualify your response.

Pricing too low to win. Agencies are trained to identify abnormally low tenders — bids that deviate significantly (typically 10 to 15 percent or more) below the average of all submissions. An abnormally low tender triggers a review where the agency may ask you to explain how you will deliver at that price. If your explanation is not convincing, your response can be rejected. Pricing below cost to win a contract is a losing strategy.

Ignoring whole-of-life costs. Some tenders evaluate pricing on a whole-of-life basis, not just the initial purchase price. This includes implementation, training, maintenance, support, and disposal costs. If the tender asks for whole-of-life pricing, provide it. If it does not, consider whether highlighting your lower total cost of ownership could be a differentiator.

Not accounting for contract management costs. Government contracts come with reporting, compliance, auditing, and administrative requirements that do not exist in private sector work. Factor these costs into your pricing or they will eat your margin.

Pricing for Panels vs One-Off Contracts

Panel pricing and one-off contract pricing require different approaches.

Panels and standing offers lock in your pricing for the panel term, which can be two to five years with extensions. Your rate card needs to remain competitive for the full duration. Consider including annual escalation clauses where the panel terms allow it. Panel pricing is a volume play — lower margins justified by consistent work flow.

One-off contracts allow project-specific pricing. You can tailor your pricing to the specific scope, risk profile, and competitive dynamics of each opportunity. This gives you more flexibility but requires more effort per submission.

Building Your Price

A structured approach to pricing government work:

1. Calculate your direct costs. Labour, materials, subcontractors, travel, and any other costs directly attributable to delivering the work.
2. Add your indirect costs. Overhead allocation, insurance, compliance costs, contract management, and reporting.
3. Add your margin. A reasonable profit margin that reflects the risk profile of the work.
4. Benchmark against market. Compare your price against AusTender contract notices for similar work. Adjust if you are significantly above or below market.
5. Stress test. Ask yourself: can I deliver this work at this price and make money? If the answer is no, either increase the price or do not bid.

Pricing government work is a discipline, not a guess. The businesses that price well are the ones that understand their costs, know the market, and have the discipline to walk away from work they cannot deliver profitably.

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Related Reading

• Tender Evaluation Criteria Explained
• Tender Response Writing Guide
• Small Business Guide to Government Contracts