Pricing for Goverment Departments and other organizations

[BusDreamer]

Hello,
I want to start accepting orders from government departments and other organizations?
What Is the pricing scheme i should follow? I don't want to give high prices because I don't want to loose contract with them?

Any advice?

[turboguy]

It is probably going to be a little trial and error. You need to make a profit so pricing too low isn't good. There really isn't enough information to answer your question. We use a multiplier based on our cost. In some cases we double our cost and in other cases we go a bit more because of higher labor costs. We sell to the government and just charge our standard price. If we were dealing with very large quantities and amounts we might charge less and if the product was very generic we might have to be more price sensitive.

[Bobjob]

I've never done business directly with a gov. As I understand it, the gov demands more paperwork and overseeing, so you have to charge more than you might normally because you are doing more work.

[turboguy]

Sometimes payments can be tough since they have different systems for paying. My next project it to try to figure out why the Navy didn't pay us for an invoice that is 5 months old. I know in one case we had to do something online to get paid.

[Brian Altenhofel]

Government contracts often tend to be more than private contracts because of the additional bureaucracy and compliance issues. Some can require some rather asinine payment terms.

What most people don't realize is that government contracts are not all about the lowest bidder. In most jurisdictions, preference can be given to a higher bid if the government entity has worked with them previously. Also, not everything is required to be put to a bid - there are often tiers where contracts under $X can be done no-bid (and those can often be paid via credit card instead of waiting 3 months for a check), $X-$Y require 3 solicited bids (with agencies often choosing who they want to go with then deliberately choosing two other organizations to request a bid from that they know will be higher), and above $Y requiring an RFP/RFQ process open to the public. Good networking can get you in on that bottom tier, and you can work your way up from there.

Many jurisdictions don't allow things like travel and incidentals to be included as line items in the bid or on the invoices to government entities. However, it's a common practice to build those into the the other items on the bid by prorating them across all of the line items.

Many government agencies will have bidding guidelines to help you build a bid that is legal and with a better likelihood of being successful.