Calculating Your Competitors' Pricing

Competitors' Pricing in Government Tenders

Understanding your competitors' pricing can significantly improve your chances of winning public sector tenders. While not always straightforward, the feedback you receive after a tender can offer a lot of answers! In public sector procurement, feedback on your tender based on the evaluation criteria is so important - whether your bid is successful or not.

Those bidding for public sector tenders should expect to receive a breakdown of their quality score, price score, based on the pricing schedule, and that of their competitors! It is well worth breaking out the calculator and digging into these.

This article will let you use this information to your advantage, specifically when it comes to tender pricing.

Competitors' Pricing Calculation

On the vast majority of government tenders you will be provided with:

• % weighting. E.g. 60% quality and 40% price. This is how they will weight your bid
• Instructions on how the bid, including the pricing will be evaluated
• Feedback detailing how you scored based on this criteria in comparison with other bidders (your competitors)

You will rarely be provided with your competitors pricing, but instead you will be provided with your pricing scores. E.g. Price score 80 (out of 100). And your competitors, scored 90 for example.

"We know they are cheaper (therefore scoring higher) but can we calculate their tender pricing?"

A Step-by-Step Calculation

Public sector buyers often use a proportional scoring system for price evaluation. This means your price score directly relates to how your price compares to the lowest bid. If you follow these steps you can calculate your competitors' pricing for that tender exercise.

• Gather Your Data
  • Your Price: The price you submitted in the tender or ITT
  • Your Price Score: The score you received for price (out of the maximum possible points)
  • Competitor's Price Score: The score a competitor received for price
• Calculate the Lowest Price
  • Convert your price score to a decimal: Your Price Score / Maximum Points
  • Lowest Price = Your Price x Your Price Score (as a decimal)
• Calculate a Competitor’s Price
  • Competitor’s Price = (Lowest Price x Maximum Points) / Competitor’s Price Score.

Example

• Your bid price was £250,000
• You received a Price Score of 80 out of a possible 100 points
• A key competitor received a Price Score of 90

Calculating Competitors Pricing:

1. Your Price Score as a decimal: 80 / 100 = 0.8
2. Lowest Price: £250,000 x 0.8 = £200,000
3. Competitor's Price: (£200,000 x 100) / 90 = £222,222 (approximately)

Analysing the Impact of Procurement Weightings

With 60% on quality and 40% weighting on price, let's have a more detailed look at how this works across 3 businesses competing for the contract:

Quality Method Statement Score (out of 100):

• Vendor 1: 95
• Vendor 2: 82
• Vendor 3: 78

Tender Price:

• Vendor 1: £250,000
• Vendor 2: £280,000
• Vendor 3: £220,000

Which bidder would successfully be awarded the tender?

Vendor 1 wins the tender with the highest quality score and 2nd lowest price based on a 60/40 split across quality and price. They would have lost the tender if the split was reversed with 40% on quality and 60% on price, with Vendor 3 then winning the bid.

By analysing these scores we can also calculate Vendor 1's price could be as high as £295,300 and still win the contract due to their higher quality score! An additional £15,300 without any further costs. This highlights the importance of market research and competitor analysis.

Tips to Improve Quality Method Statements

Reviewing this example from a different angle, how could we get Vendor 3 to win the tender?

They were the highest scoring on the pricing section (cheapest), so not a lot of impact we can have here. Could they however, develop their quality method statements enough to win? In this example, they would need to improve their quality score by just over 12% to have won the contract. This is where bid management consultancies and bid writers can be very handy indeed!

Vendor 3 opportunities to improve the quality of their tender response

1. Further demonstrating their understanding of the buyer's needs and tailoring the bid more
2. Better evidence
3. Ensure their bid is well-structured and easy to read
4. Highlight added value and innovation
5. Investing in bid writing courses for their team
6. Had the bid reviewed
7. Outsourced the bid writing?

Bid Strategy & Competitors' Pricing

"With knowledge comes power, and with power comes great responsibility”

There is no point in knowing this information and not using it! It can be used to:

• Refine your future tender pricing
• Inform your bid no bid decisions
• Competitor profiling
• Improve your bid strategy

If your estimated competitor's prices are significantly lower, consider if there's room to reduce your costs or enhance your value proposition. If your price is lower, you might have room to increase it slightly while remaining competitive.

Important Considerations:

• Bid Quality Matters: Remember, price is only one part of the evaluation. Ensure your quality submission is strong to maximise your overall score. On most public sector tenders quality is higher than price. Within quality we also have Social Value.
• Evaluation Methodology: Always refer to the tender documents to confirm the buyer's specific pricing evaluation method. The calculation above assumes a proportional scoring system.

Need Expert Guidance?

Bidding for public sector tenders can be complex. If you need support with bid management, bid reviews, or competitor analysis, our team is here to help. Contact us at hello@thorntonandlowe.com or 01204 238046.