Start with how the buyer will score price
Before anyone opens a spreadsheet, read the evaluation section of the RFP twice. The scoring method tells you how aggressive you need to be.
Look for:
- Price weighting. Is price 20% of the score or 60%? A low weighting means a strong technical response can carry a higher price. A high weighting means every dollar matters.
- Scoring formula. A common approach gives the lowest bid full points and scores others proportionally (lowest price divided by your price, times the maximum points). Under that formula, being 10% above the lowest bid costs you about 10% of the price points, not all of them.
- Award basis. Public sector bids sometimes use "lowest price technically acceptable." In that case, technical quality only needs to pass the bar, and price decides the outcome.
- What counts as "price." Is it year-one cost, total contract value, or total cost of ownership over three to five years? This changes which numbers you should optimize.
If the scoring method is unclear, ask during the clarification window. A short, specific question works: "Please confirm whether price will be evaluated on year-one fees or total contract value over the initial term."
Set your floor, target, and walk-away before writing a number
Decide your limits internally before the deadline pressure hits. Once a number is in a draft, it tends to stick.
- Floor. Your fully loaded cost to deliver: labor, hosting or materials, implementation effort, support, travel, and account management. Include the cost of the sales cycle if the deal is large and long.
- Target. Where you want to land based on your standard pricing, the value to this buyer, and what you know about competitors.
- Walk-away. The lowest price you would accept after negotiation. This usually sits above the floor, because a deal at cost still carries risk and opportunity cost.
Write these three numbers down and get sign-off from finance and the deal owner. Also agree who can approve discounts at each level, so the team is not chasing approvals during a best-and-final round.
A quick sanity check: if you would need to price at or below your floor to be competitive, that is a signal to reconsider whether to bid at all.
Use the buyer's format, then add options carefully
Evaluators compare bids side by side. If your pricing does not fit their template, you make their job harder, and some procurement teams will mark a non-conforming price sheet as incomplete.
Rules to follow:
- Fill in every line of the provided price schedule, even if the answer is "included" or "$0."
- Use the units the buyer specified: per user, per site, per hour, per transaction.
- Keep totals consistent between the price sheet and any narrative. Mismatches are one of the most common reasons for clarification requests and lost credibility.
Adding alternatives. If you believe a different structure serves the buyer better, submit it as a clearly labeled alternate, not as a replacement. For example:
Base Proposal: Priced per the required schedule, 500 named users, annual billing. Alternate A (optional): Enterprise license, unlimited users, fixed annual fee. Offered because the RFP notes expected growth to 900 users by year three.
Limit yourself to one or two alternates. More than that looks like you could not decide, and it dilutes attention from your compliant bid.
Price your assumptions and exclusions explicitly
Most pricing disputes after award come from things nobody wrote down. A clear assumptions section protects your margin and shows the buyer you understand the scope.
Cover at least:
- Volume assumptions: users, transactions, sites, data volumes.
- Buyer responsibilities: access, data preparation, internal project resources, decision turnaround times.
- Exclusions: integrations, custom development, travel, third-party licenses, or anything the RFP left vague.
- Change pricing: rates for additional work, usually as a rate card.
- Escalation: how prices change in later years. A fixed annual increase or an index-linked cap is common.
- Validity period: how long the offer stands, often 90 to 180 days for larger procurements.
Example wording:
Pricing assumes up to 2,000 monthly active users and integration with one identity provider via standard SAML. Additional integrations are priced at the rates in Schedule C. Fees for years two and three will increase by no more than 4% annually.
Keep assumptions reasonable. A long list of hedges reads as a vendor protecting itself, and evaluators may score that as risk.
Present the price so evaluators can defend it
The person scoring your bid often has to justify their recommendation to a committee or a budget holder. Give them the material to do that.
- Show what is included. Break the total into clear components: software, implementation, training, support. Buyers distrust single lump sums on complex scopes.
- Tie price to requirements. Reference the RFP section numbers each line item covers.
- Show total cost over the term. If your year-one price is higher but ongoing costs are lower, show a simple multi-year table so the comparison is fair.
- Explain discounts plainly. "15% multi-year discount applied for a three-year commitment" is clearer than a vague "special pricing."
- Avoid surprises in the fine print. Payment terms, minimum commitments, and auto-renewal clauses should appear in the pricing section, not only in the contract appendix.
Keep the narrative short. One paragraph explaining your pricing logic is usually enough; the numbers should speak for themselves.
Plan for clarifications and best and final offers
Many procurements include a clarification round or a request for a best and final offer (BAFO) from shortlisted vendors. Your first submission should anticipate this.
How to leave room without looking inflated:
- Price near your target, not at your walk-away. You need space to move.
- Identify non-price concessions in advance: longer payment terms, extra training days, a price lock for renewals, faster implementation, or included premium support.
- Prepare a concession list ranked by cost to you and value to the buyer. Give the high-value, low-cost items first.
When a BAFO arrives:
- Read what the buyer is asking. Sometimes they want scope clarity, not a lower price.
- Ask, if allowed, where your bid stands relative to expectations. Some buyers will tell you if you are well above budget.
- Trade, do not just cut. Pair any price reduction with something: a longer term, a reduced scope, or a reference agreement.
- Confirm the final number with finance against your walk-away before submitting.
A large unexplained drop at BAFO can damage trust, because it suggests the first price was padded. If you reduce significantly, explain what changed.
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Common questions
Should we always try to be the lowest bidder?
No. Check the price weighting and award basis first. If price carries a modest share of the score, a stronger technical and risk profile can win at a higher price. Chasing the lowest price often leads to thin margins and delivery problems after award.
How much negotiation room should we build into the initial price?
There is no standard figure, and it depends on whether the process includes a BAFO round and how price is scored. A practical approach is to submit near your target price and hold your walk-away number internally, using non-price concessions to cover much of the negotiation. Heavily padded prices risk scoring poorly in the first round and never reaching negotiation.
What if the RFP pricing template does not fit our pricing model?
Complete the template as closely as you can, translating your model into the buyer's units, and state any conversion assumptions. Then submit your preferred model as a clearly labeled alternate. If the mismatch is significant, raise it as a question during the clarification period so all vendors receive the same guidance.