How to price a government bid without leaving money on the table

Pricing a government bid is a balancing act. Price too high and you lose to a cheaper competitor. Price too low and you win a contract that quietly bleeds your business dry. This guide walks through a simple, repeatable way to build a price that covers your real costs, protects your margin, and still stands a fair chance of winning.

Start with your real costs, not a guess

Too many small businesses price a bid by copying last year's number, or by guessing what a competitor might charge. That's a recipe for underpricing. Instead, build your price from the ground up using two buckets.

Direct costs are the costs you can trace straight to this contract: labour hours, materials, subcontractors, travel, equipment rental, and anything else you'd only spend if you win this job. List every line item, even small ones like parking or courier fees. They add up over a multi-year contract.

Indirect costs, sometimes called overhead, are the costs of running your business that aren't tied to one job: rent, insurance, admin staff, software subscriptions, accounting fees. Spread these across your expected annual revenue to get a fair overhead rate per hour or per dollar of direct cost. If you skip this step, you're effectively asking your other clients to subsidize the government contract.

Add both together and you get your fully loaded cost — the true floor price below which you lose money on every unit of work.

Build in the right margin

Once you know your floor, decide your margin — the profit you add on top. This is where a lot of first-time bidders freeze. Too thin, and one delay or scope change wipes out your profit. Too fat, and you price yourself out of the shortlist.

A few rules of thumb that hold up across most sectors:

• Government work tends to pay reliably but slowly. Price in the cost of waiting 30 to 60 days for payment, especially if you're financing materials or payroll in the meantime.
• Multi-year contracts should include a small annual escalation for inflation and wage growth, built into the price from day one, not renegotiated later.
• If this is your first contract with a buyer, a slightly tighter margin can be worth it to build a track record. Check our guide on building a past-performance portfolio when you have no government contracts yet for how to weigh that trade-off.
• Never price at a loss hoping to make it up on change orders. Buyers scrutinize change orders closely, and you may never get the chance.

Read the evaluation grid before you price

Price is rarely the only thing being scored, and understanding the weighting changes how you should price. Some tenders score price as 30% of the total; others score it at 70%. A rated criteria structure that weighs technical merit heavily gives you room to price fairly and win on quality. A price-heavy grid rewards the leanest bidder, which is riskier for your margin.

Before you set a number, read the request document carefully and work out exactly how price will be scored against everything else. Our guide to how government evaluates bids and scoring grids walks through how to reverse-engineer a scoring grid so you know where the real competition will happen. Also make sure your price doesn't accidentally trip a mandatory requirement — a pass/fail condition that has nothing to do with price but can disqualify you regardless of how competitive your number is. See mandatory vs rated requirements for the difference.

Don't forget the costs that hide in the fine print

Government contracts carry costs that don't show up in a typical commercial quote. Missing these is one of the most common ways small businesses accidentally underprice a bid.

• Bid bonds and performance bonds: many tenders require a financial guarantee that you'll honour your bid or complete the work. These have real fees attached. Read bid bonds, performance bonds and letters of credit explained before you price, not after you win.
• Insurance top-ups: government contracts often demand higher liability limits than your current policy. Get a quote for the increase before you submit, not after.
• Compliance and reporting: some contracts require regular reports, security clearances, or site inspections. Each of these costs staff time.
• Canadian content rules: under the federal Buy Canadian Policy, larger strategic-sector contracts now carry Canadian-content requirements for materials like steel, aluminum and wood, and this threshold is expected to widen through 2026. If your supply chain includes imported materials, price the cost of finding a compliant alternative, or of documenting your existing Canadian content. Our guide on preparing for the Buy Canadian Policy covers what to check first.
• Tariff exposure: if any part of your supply chain touches tariffed goods, build in a contingency rather than absorbing the risk silently. See what tariffs mean for your bid pricing for a plain-language breakdown.

A simple pricing checklist

Use this table as a final check before you submit any price. It's not exhaustive, but it catches the mistakes that come up again and again.

Cost category	What to check	Easy to miss?
Direct labour	Realistic hours, not best-case	Sometimes
Materials	Current supplier quotes, not last year's price	Yes
Overhead	A fair share of rent, admin, insurance	Very often
Bonding	Bond premium included as a cost, not an afterthought	Very often
Insurance top-up	Quote for the higher limit the contract requires	Very often
Payment terms	Cost of waiting 30–60+ days for payment	Often
Escalation	Annual increase built in for multi-year contracts	Often
Canadian content	Extra cost of compliant materials, if applicable	Emerging risk
Tariff exposure	Contingency for tariffed inputs	Emerging risk
Contingency	A buffer for scope surprises, not padding for profit	Sometimes

Common mistakes that cost bidders money

Some pricing mistakes are so common they're almost predictable.

Racing to the bottom. Undercutting every competitor might win the contract, but a loss-making win is worse than no win at all. If you can't deliver at your price without cutting corners, you'll damage your reputation with the buyer, which matters far more over time than one contract.

Ignoring the buyer's award history. Some buyers consistently award to the lowest compliant bid; others favour value and experience. Knowing which type of buyer you're dealing with changes how aggressively you should price. Our piece on evaluating a buyer's award history before you bid explains how to check this before you commit hours to a proposal.

Treating every tender the same. A tender with light competition and a niche requirement can support a higher margin than a commodity service with ten bidders. Use live tender search and opportunity landing pages by category and province to get a sense of how much similar work typically attracts, and price accordingly.

Forgetting who else might bid. If a joint bid or subcontracting arrangement would let you offer a more complete, more competitive price, weigh that option early. See when to team up for a joint bid for how to decide.

Adjust for the current procurement climate

Pricing decisions in 2026 need to account for a shifting policy backdrop. The Buy Canadian Policy is giving Canadian suppliers an evaluation edge on qualifying federal contracts, reciprocal procurement rules are narrowing which foreign suppliers can compete on many non-defence contracts, and provinces are steadily removing interprovincial trade barriers that used to block out-of-province bidders. None of this changes your cost math directly, but it does change your competitive position. If your supply chain is genuinely Canadian, say so clearly and price with the confidence that fewer foreign bidders may be in the running. If you're exposed to tariffs or imported inputs, price the risk honestly rather than hoping it won't materialize.

Final sanity check before you submit

Before you hit submit, step back and ask three questions: does this price cover my fully loaded cost with a margin I can live with, does it reflect exactly how price is weighted in the scoring grid, and have I priced every hidden requirement from bonding to Canadian content? If you can answer yes to all three, you're pricing to win the contract, not just to win the bid.

Pricing well is a skill that improves every time you do it. Keep a record of what you bid, what you won, and what you'd change next time, and each future bid on Tendarix will get a little sharper.