Price-to-win is a process whereby a winning price for a federal government proposal is determined, thereby leading to a government contract. The process involves strategic thinking such as an overall strategy, competitive positioning, strategic partnering among many variables that require research. Based on the strategic statements developed, a pricing model is constructed and scenarios run to determine a price for the contract that will be a win for the federal government and a win for the government contractor.
Price-to-Win Begins with a Pricing Strategy
A government contractor pricing a proposal without a strategy is like a ship without an anchor or direction. A sample strategy: Offer the lowest price among the competition but still be profitable – if this is not possible, it is a no bid decision.
Price-to-Win is All about Finding a Price that is Win/Win
Win/win for a federal government contract means that the submitted bid is win for the federal government and win for the government contractor. Winning at the lowest price and not being profitable as a government contractor is, generally, not a good strategy. Winning a contract is about money coming in from the federal government based on contractually agreed upon prices. But, if the money coming in based on the contractual price does not cover the cost to the contractor in such a way as there is no profitability for the contractor, it is not a good deal for a government contractor.
Price-to-Win is about Predictions
What will the federal government expect to pay for the products and services required? As importantly, how will your competitors price these products and services? A winning price takes both of these predictions into consideration.
Price-to-Win is a Reiterative Process
PTW is a process whereby finding the right price involves running scenarios. It means going back, time after time, and adjusting the pricing variables as more is learned. Here is an example for the profit variable. What will the percentage for profit be that competitors will use? If that is not known, then that variable is a “soft” number. Different scenarios need to be run to understand the impact of different changes in that percentage.
Price-to-Win is All about Understanding Trends
PTW models based on what is required in the RFP often involve a 5-year or a 10-year timeframe. Knowing the short-term and long-term trends in the marketplace in the area of the RFP is critical to finding the right price.