How to Price a Public Tender

What does the price in a tender actually decide?

A public tender asks for a price, and that price is scored in the way the procurement documents describe. Under Directive 2014/24/EU, contracting authorities award on the most economically advantageous tender. It is identified on the basis of price or cost, using a cost-effectiveness approach such as life-cycle costing, and it may include the best price-quality ratio. Quality, method, and social or environmental factors count when the pack gives them weight.

In England, Wales, and Northern Ireland, procurements started on or after 24 February 2025 follow the Procurement Act 2023. Section 19 allows an award to the most advantageous tender: the tender that satisfies the authority's requirements and best satisfies the published award criteria. Cabinet Office guidance describes that shorter name as a clarification. An award on lowest price remains possible, and price does not have to outrank other factors. Scotland has its own procurement legislation. Below the EU thresholds, national rules can differ. A United States federal solicitation follows the Federal Acquisition Regulation rule it names. The notice tells you which test applies. The pricing work starts once this pack is open.

Run your price through the formula printed in this pack before you treat a discount as a strategy.

How do price, cost, and quality share the award?

Article 67 requires the procurement documents to state the relative weighting of each criterion, except where the award is on price alone. Where weighting is not possible for objective reasons, the criteria appear in decreasing order of importance. The cost element may be a fixed price, with competition on quality only. Some countries also limit awards that use price or cost as the only criterion.

Those criteria have to relate to the subject-matter of the contract, including factors in production or trading and later life-cycle stages. They must allow real competition, and the documents must make the claims verifiable. Under section 23 of the Procurement Act 2023 the criteria must be clear, measurable, specific, and proportionate to the contract, and the authority must publish the assessment method, including any criterion that disqualifies a tender.

Where the buyer uses life-cycle costing, Article 68 covers acquisition, use, maintenance, and end-of-life costs to the authority or other users, to the extent each is relevant. Environmental costs such as greenhouse-gas emissions count where their monetary value can be determined and verified. The pack states the data you provide and the method that turns it into a cost. Selection is a separate test: it asks whether you can perform the contract. Award criteria compare the offers that pass.

What should the number in the pricing schedule contain?

Build the figure from the schedule in this pack. It states whether the cells are exclusive of VAT or inclusive, and whether you are pricing a lump sum, rates, or hours against a volume. Treat an estimated volume as a scoring input unless the contract obliges the buyer to order it, and test the margin if the order is smaller.

Where the documents say the price is inclusive, travel, licences, training, an indexation cap, a bond, extra insurance, and staff-transfer costs sit inside it. A framework fee that is a percentage of later contracts belongs there too, when this arrangement charges one. Follow the pack's rule on inconsistent totals: words, the workbook, a correction for an obvious clerical error, or a mismatch treated as a defect. If the method promises a senior specialist three days a week, the workbook has to contain that time.

How does the scoring model change a price you can live with?

Use the formula printed in the procurement documents. The figures below illustrate one common relative pattern. If this pack prints another formula, run that one.

The documents give 40 points for price and 60 for quality. The lowest price scores 40. Any other price scores 40 multiplied by the lowest price divided by its own. Quality, marked out of 100, is multiplied by 0.6. Northline Civic Ltd, a fictional bidder, prices 100 and a competitor prices 120. With equal quality marks of 70, Northline Civic totals 82 and the competitor 75.3. If the competitor scores 90 and Northline Civic stays at 70, the totals are 82 and 87.3, and the higher price wins. An award on price alone removes that offset. Where the buyer fixes the price and scores quality only, a discount gains no marks.

When does a low price have to be explained?

Article 69 requires an explanation where a tender appears abnormally low for the works, supplies, or services. That explanation may cover the method and its economics, favourable conditions, originality, compliance with the environmental, social, and labour obligations in Article 18(2), subcontracting obligations in Article 71, and possible State aid. The authority may reject the tender only where the evidence does not account for the price, and it must reject the tender where the low price comes from breaching those Article 18(2) obligations. The directive gives no universal percentage. Use the threshold in the national rules or the pack, and keep a build-up that still meets those obligations.

Under section 19 of the Procurement Act 2023, an authority may disregard a price it considers abnormally low only after notifying the supplier and giving a reasonable opportunity to show that performance is possible at that price. If the supplier shows that to the authority's satisfaction, the tender stays in. Keep the build-up either way, and apply the statute named on the notice.

What should you check before the price is locked?

Northline Civic Ltd is pricing a three-year municipal case-management service at 60 per cent quality and 40 per cent price. The workbook is exclusive of VAT, the volume is an estimate, travel is included, and annual indexation is capped at 2 per cent. A first draft that uses last year's rates, adds VAT into the scored cells, and recharges travel is a different offer from the one the workbook asks for. The revised build-up removes that VAT, treats the volume as an estimate, prices travel inside the rates, and tests the cap against expected wages. A further cut that depends on unpaid overtime stays out. It is the first point an abnormally low question would expose.

• Name the award test: price only, price and quality, a fixed price, or life-cycle cost.
• Copy the scoring formula and run your price through it.
• Confirm VAT, currency, and whether each lot or option is priced alone.
• List every cost the schedule includes and every cost the contract returns to you.
• Mark estimated quantities as estimates and test a lower volume.
• Match the method statement to the hours and grades in the workbook.
• File the build-up you would send if asked to explain the price.
• Name who may still change the number, and when the workbook freezes.

How does TenderFaro help with the pricing read?

TenderFaro turns the notice and the procurement documents into structured requirements, including award criteria, dates, and pricing instructions, and compares them with the company's certificates, insurance, policies, and project references. Each finding keeps its source, so a reviewer can open the sentence on the price-quality split, the VAT basis, or a low-tender rule. It does not set a price or decide that a figure is abnormally low. The people who would deliver at that price do. The guide to public tenders covers the path from notice to award. Beside it sit the pieces on how a public tender runs, on writing a response evaluators can score, and on the mistakes that get a bid disqualified.