Government contractors always ask: when does price matter? The simple answer is always to employ strategic pricing®. In these days of significant competition for Government contracts, strategic pricing® is, even more, of a factor now than ever before. Even when you know that the price is not scored, it will be evaluated, and the price will oftentimes be the deciding factor.

Homework

Whether the procurement specifies the best value or low price technically acceptable (LPTA), doing your homework and honing your money details to the right target price, is likely to spell the difference between a win and losing an important competitive procurement. Also, using all the tools available to you to get to a strategic price that is right for your company and the bid is key to making the price you bid matter.

Winning Pricing Strategy

Many Government contractors (Gov Con) companies have great technical solutions, but winning a competitive procurement requires a winning pricing strategy as well as a great technical proposal. The winning price proposal may or may not necessarily be the low price. Government contractors seem to get involved in the mechanics of filling out the forms and spreadsheets without much thought to what constitutes a winning price. It takes getting information ahead of time, doing the analysis, and looking at all the components of price objectively.

Price Matters!

What makes price matter so much these days is that you can win technically but lose on price. What makes the difference for a Gov Con? Not guessing about the price. Finding out about your customer, company, and competition will get you closer. Learn your competitor’s likely price including history & bid aggressiveness. Make it your priority to find out what your target price range ought to be. Most people believe that the only way to get the pricing “right” is to perform a price-to-win that will generate a target price. Obtain a price-to-win range or develop it yourself. It is a range rather than an exact number that translates to the winning price.

Get to know your company business plan, capture plan, and proposal plan as well as the company financial parameters that will drive the price. Think of it all as a wide rubber band that allows you to strategically stretch and compress the monetary factors to achieve your desired price.

Develop Pricing Early

Most companies still build up costs, slap a reasonable (or competitive) fee on the cost, and submit the price. Most of the time pricing gets accomplished at the last minute with extraordinarily little thought to what it takes to win. The three components of strategic pricing® that matter are data gathering, analysis, and real decision-making about price. This process is ongoing throughout the proposal process and, most importantly, the process begins earlier than you think. Developing and implementing a pricing proposal plan as part of the winning strategy is critical to an award – it cannot be accomplished at the last minute.

Key Strategies

What else matters in developing your price? The following are the key points to consider in developing a winning pricing strategy, plus there is a great deal more in the book mentioned below.

  1. The price to win is not an exact number but a process to derive price + capabilities+ risk.
  2. Costs do not set price, the market does – find out what the market will bear. Hence, price to win analysis.
  3. Get creative with using the strategic pricing® tools -see Secrets of Strategic Pricing® for Government Contractors.
  4. Make early and timely decisions on pricing strategies with a repeatable process.
  5. Develop your company’s internal pricing strategy model before the RFP is released.
  6. Resist the technical temptation to over-scope.
  7. Develop a preliminary and ongoing pricing relationship with your teammates so they remain focused on winning as much as you are.

Government ContractsWhen you set out to submit a Government price proposal, developing your strategy encompassing ALL the factors will get you closer to turning your bids into awards. With focused attention on these ideas, you will not be guessing about the price, you will be riveted on what you need to win.

For more information check out this article on Cost and Price Analysis in Government Contracts

By Marsha Lindquist

Marsha Lindquist
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