How to price a government contract bid
Direct labor, fringe, overhead, G&A, and fee, in plain language, plus why the lowest number is not always the rule. Draft for review. Not a rate sheet.
Price is a compliance item and a business decision. The notice tells you which one the agency will emphasize. Your books tell you whether you can live with the number. Govacha does not set your rates.
Build the cost before you pick a fee
A simple build-up, in words:
- Direct labor is the hours of the people doing the work, times their pay.
- Fringe is the cost of employing them: payroll taxes, leave, health coverage, and similar items.
- Overhead is the cost of the shop that sits over that labor, if you track it that way.
- G&A, general and administrative, is the cost of running the firm: leadership, accounting, insurance that is not already in overhead.
- Fee, or profit, is what you propose to keep after cost.
Wrap rate is a shorthand for how many dollars of price sit on top of a dollar of direct labor once fringe, overhead, and G&A are in. It is a check, not a magic number. If you do not know your own wrap, do not borrow one from a webinar.
Lowest price is a rule only when the notice says so
Some buys are lowest price technically acceptable. Some are best value, where a higher price can win if the approach and the past performance support it. Read the evaluation factors. Do not assume the cheapest offer wins, and do not assume a careful price will.
Pricing below what the work costs, in order to “get in the door,” can sink the job you win. A wage determination, when the notice includes one, is a floor. A number under that floor is not a strategy.
What the software will not do
Proposal tools can hold the volume and the checklist. They do not know your labor rates, your indirect rates, or your cash. Someone who will sign the offer has to own the number.
This is not accounting advice and not a promise that a well-priced bid will be awarded.