Another Loss Due To Price
As a pricing professional, I feel like I have seen it all when it comes to government pricing. I have had clients pull all-nighters and spend thousands of dollars in proposal preparation costs only to receive the dreaded notice they were not selected due to overbidding the project.
What I find most interesting about this whole pricing notion is that large government contractors have entire departments dedicated to pricing activities and yet many small businesses choose not to invest in this area. It’s quite baffling. We performed an internal analysis of our clients recently and it showed, on average, clients who needed external pricing support typically lost between 8 to 10 bids before they contacted us for help. In my opinion, that’s a lot of wasted proposal dollars, not to mention the deflated hearts of those that pulled it together. Lastly, our research also showed when customers received support from outside experts their pricing profitability increased by 18% and wins increased on an average of 32%.
So if you want to be even a 1/4th as successful as your large business counterparts, you should read this. Here are 4 of the MOST common errors I have seen in cost proposals as it relates to pricing:
- No pricing or budget narrative: The devil is always in the details. A budget narrative provides detailed breakdowns of the price that’s being proposed. 6 out of 10 times solicitations don’t require them, but you should provide one anyway. It’s the opportunity to give context and justification to your pricing methodologies. You should also detail project assumptions and how they relate to price as well. Lastly, it’s the area where you can show cost savings or other pricing benefits.
- Not recognizing and acknowledging your value: Part of delivering a compelling proposal is to convey the value your company brings to the table. The perception and explanations of that value can be best shown in your pricing without hinting at numbers specifically. Use your unique value proposition to show how a customer will save time, get a better product or some better innovation.
- Don’t understand your competition: Underestimating your competition when it comes to government contracting is just plain stupid! One of the keys to successfully bidding is to understand who you are bidding against. Government transparency makes that simple. There is no shortage of collecting pricing and contracts data as it relates uncovering incumbent, competitor and agency buyer info. Start by using tools like GSA’s eLibrary, USASpending.gov, FPDS.gov or by submitting an FOIA agency request.
- Don’t know your margins: To be competitive in this space you need to have a thorough understanding of your costs; with a special emphasis on both direct and indirect costs. Whether you use an exhaustive pricing spreadsheet or invest in expensive government accounting software, having a good pricing tool to assist in the development of your costs proposals can ensure your cost competitiveness and profitability. You also need a pricing tool that can also assist with separating your costs, analyze your allocation bases and make quick decisions based on various pricing schemes. If you are not aware of iRIVAL for small business government contractors.
Pricing is a skill that doesn’t automatically get better the more you do it. It’s understanding your methodology and application. Pricing gets sharper with the incorporation of intuitive resources, integrative tools and data intelligence at your disposal. As you continue to pursue government contracts, the investment of your pricing activities becomes even more critical, determining the difference in consistently winning bids.