Build up your full cost first
Your cost is more than what your supplier charges you. List everything it takes to deliver the order:
- Product cost from your supplier, in writing, valid for at least as long as your own quote.
- Delivery to the address in the RFQ, including fuel, tolls and time.
- Labour for installation, assembly or offloading if it's included.
- Packaging, printing or branding if the specification asks for it.
- Money cost. You usually pay your supplier before government pays you. Payment typically comes within 30 days of a correct invoice, so allow for the cost of funding that gap.
Add margin the right way
Margin and markup are not the same. If you want 20% of the selling price to be profit, divide your cost by 0.8. Don't just add 20%.
| Add 20% markup | Price for 20% margin | |
|---|---|---|
| Your full cost | R20,000 | R20,000 |
| Selling price | R24,000 | R25,000 |
| Profit | R4,000 (16.7% of price) | R5,000 (20% of price) |
Price = cost ÷ (1 − margin). For a 20% margin: price = cost ÷ 0.8
Know how price is scored
On most government quotations, price counts for 80 of the 100 points. The lowest acceptable price gets all 80. Everyone else is scored with this formula:
Points = 80 × (1 − (your price − lowest price) ÷ lowest price)
| Your price vs the lowest | Price points |
|---|---|
| Equal to the lowest | 80 |
| 5% higher | 76 |
| 10% higher | 72 |
| 20% higher | 64 |
So being 10% more expensive costs you 8 points. Strong specific-goal points (out of 20) can make that up, which is why claiming them properly matters.
Get VAT right
- VAT registered: show prices excluding VAT, the VAT at 15%, and the total, exactly as the pricing schedule asks.
- Not VAT registered: you may not charge VAT. Your price is your final price.
Protect your margin
- Match your supplier's price validity to the RFQ's validity period, or build in a buffer.
- For imported goods, allow for exchange-rate movement before delivery.
- Never underquote just to win. If appointed, you must deliver at the price you quoted.
- Keep a record of winning prices you see. Over time it shows you where the market is.
Quick check before you submit: full cost listed, margin calculated as a share of price, VAT handled correctly, totals add up, and the price is one you'd be happy to deliver at.