Price and negotiation in a private tender: hold on to your margin

Know in advance whether there will be negotiation

Just ask. Is there a second round, a price conversation, or a best and final offer? How will the client finally choose? Many clients tell you if you ask, and otherwise their way of buying often shows it. A large organisation with a procurement department nearly always negotiates.

If you know, keep room in your calculation. Not so much that your first price is out of the market, but enough to give something in a second round without going below your own floor.

Did not know? Never drop too far

If the client unexpectedly asks for a lower price, it is tempting to drop a lot. Do not. A supplier who comes in much lower in the second round is saying that the first price was wrong. Then the client wonders what else is wrong.

Give something small instead, with a reason. Or give something other than price: a longer term, an extra service, better payment terms. That way your price stays credible.

Drop too far in the second round, and you say your first price was wrong.

Where your margin leaks after the award

Won is not earned. Margin often disappears only afterwards, in the contract phase and the first months.

• Extra agreements in the contract phaseWhile working out the contract, wishes appear that were not in your proposal. Every small concession costs money over the whole term.
• Too much managementMeetings, reports and an account manager spending more time than you calculated. It is not a cost line anywhere, but you pay for it.
• Promises that cost too much afterwardsWhat you promised in your proposal or pitch to win, you must also deliver. Cost every promise before you make it.

So keep one list of everything you commit to, from proposal to contract, and cost it. In a multi-year contract, add indexation: agree how your price grows with your costs.