Issue Date: 
Monday, October 13, 2014

Direct and Indirect Costs: 2 items that determine tender pricing

Article by Werner van Rooyen

www.how2tender.com

13 October 2014

Many bidders that respond to tenders struggle when it comes to calculating a price for a specific tender. One of the reasons for this is that a large number of small business owners are usually new to the tender process and therefore they lack the necessary experience to price their bids correctly.

Without getting into the fundamentals of accounting there are two basic items that determine your tender price. In fact, these two basic items should always be your guide when determining your price on the goods or services you sell.

The two items that determine pricing are:

  • Direct Costs; and
  • Indirect Costs.
  1. Direct Costs

Direct Costs are the costs that one pays to either:

  • Produce goods or services; or
  • The cost price you pay to procure goods or products that you will resell to your customers.

In other words, if you manufacture wooden chairs your direct costs will be the money you spend on purchasing the wood for the chairs. Other direct costs in manufacturing wooden chairs would be wood glue, nails and labour costs.

Thus, when responding to a tender you must take the utmost care that you include all your direct costs in your tender price.

  1. Indirect Costs

Indirect Costs are the expenses that you incur to run your business, these costs do not necessarily generate any income. Some of the most common indirect costs that your business incurs are:

  • Rent
  • Utility expenses such as electricity and water
  • Telephone
  • Stationary
  • Salaries and wages
  • Accounting fees

It is very important to include indirect costs in your tender price. Remember that the tender will form part of your normal day-to-day business and therefore it must contribute to your indirect costs.

The question is how to calculate how much of the indirect costs are contributable to the tender. There isn’t one specific rule but one of the more common rules is to estimate the time spend on servicing the tender and then use that to factor in the indirect costs into the tender price. In other words if you have to spend 50% of your time servicing the tender then 50% of your indirect costs should be part of your tender price.

Please visit our website at www.how2tender.com for more on these as well as other interesting topics. You will also find our Tender Manual there - the Tender Manual guides you through the whole process of responding to a Tender or a Request for Proposal.

Until next time.

Title Closing Date Tender No.
Westcol hereby invite bids from established, registered providers to provide physical security services (guards) to one or more of the following Westcol campuses for a period of 24 months. Krugersdorp; Krugersdorp West; Randfontein; Magaliesburg; Carletonville. 2018-10-12 10:00 WT 2018/ 0003
Placement or Outright Purchase of Film Coverslipper Analyser for NHLS Braamfontein, Doctor Goerge Mukhari Hospital, Chris Hani Baragwanath Hospital and Nioh For a period of three years 2018-10-15 11:00 RFB081/ 18/ 19
Phuthaditjhaba Magistrate Office: Rendering Of Cleaning Services For 24 Months. 2018-10-16 11:00 BL18/ 061
Rendering of travel agency services to the Department of Social Development (excluding MEC & HOD),for a period of 36 months. 2018-10-05 11:00 NC/ SOC/ 013/ 2018
Supply , Delivery and Off-loading of Perishable Provisions for Thohoyandou and Polokwane management areas ( Limpopo Province) 2018-11-06 11:00 LMN 06/ 2018 LIMPOPO
Appointment of service providers to implement The Animal and Veld Management Programme (AVMP) Soil Rehabilitation Projects in Spitskop and Zandmartinsdrift Land Reform Farms in the Edinburg area in Kopanong Local Municipality within Xhariep District Municipality as well as in De Hoop Land Reform Farm in the Bloemfontein area within Mangaung Metro Municipality in the Free State province. 2018-10-05 11:00 PSSC- RID- FS 0004 (2018/ 2019)
Supply, Delivery and Off-loading of Perishable Provisions at Klerksdorp, Rooigrond and Rustenburg Management Areas (North -West Province) 2018-11-06 11:00 LMN 04/ 2018 NORTH - WEST
Appointment of service providers to implement The Animal and Veld Management Programme (AVMP) Soil Rehabilitation Project in Rietfontein Land Reform Farm in the Soutpan area in Masilonyana Local Municipality within Lejweleputswa District Municipality in the Free State province. 2018-10-05 11:00 PSSC- RID- FS 0003 (2018/ 2019)
Supply , Delivery and Off-loading of Perishable Provisions at Barberton ,Bethal and Witbank management areas( Mpumalanga Province) 2018-11-06 11:00 LMN 05/ 2018 MPUMALANGA
Appointment of a service provider to render security guarding services at the Department of Public Service and Administration for a period of two (2) years. 2018-10-12 11:00 DPSA002/ 2018
Provision of Geographical Information Solution (GIS) including maintenance and support services. 2018-10-24 11:00 RFP 29/ 2018
6000 units of emollient bp cream with chlorocresol 500g, or equivalent 2018-10-08 11:00 ZnqLS443/ 18gaz
Butterworth Magistrate: Repairs & Servicing of Air-Conditioners. 2018-10-11 11:00 MTH 59/ 2018
36 units of Dextran 40, 10% in sodium chloride injection iv solution, 0.9% 500ml (Rheomacrodex), or equivalent 2018-10-08 11:00 ZnqLS442/ 18gaz
Drain cleaning and verge maintenance on Road P242, from 0.00KM TO 9.9KM. 2018-09-27 11:00 ZNT373T/ 2/ 4/ CDUR/ 601/ S/ 10/ 2018- 19
Drain cleaning and verge maintenance on main road P100 section 1&2 between chainage 0.00KM to chainage 14.5KM. 2018-09-27 11:00 ZNT373T/ 2/ 4/ CDUR/ 601/ S/ 05/ 2018- 19
Supply and Delivery of Dairy products and Maize Drink to the Gauteng Provincial Government (GPG) Departments and State Information Technology Agency (SITA) for a period of 36 months 2018-10-12 11:00 GT/ GPT/ 126/ 2018
Betterment and graveling on road D755 from KM 1.80 TO KM 2.80. 2018-09-27 11:00 CDUR/ 620/ S/ 03/ 2018
Supply and Delivery of Self-Adhesive Pharmaceutical Labels to all Hospitals/Institutions under the control of the Department of Health, Western Cape Government for a period of three (3) years 2018-10-19 11:00 WCGHSC0168/ 2018
Installation of Speed humps and Rumble strips on P129. 2018-10-23 11:00 ZNT373T/ C237/ 12000/ S/ 13

Pages

Advantages and disadvantages of Consortiums

Consortiums are often considered as entities to use when responding to tenders in South Africa. The question that arises is whether to use a Consortium or a Joint Venture when responding to a tender. To help you with this we have compiled a list of advantages and disadvantages for both Consortiums as well as Joint Ventures. In this article we list the advantages and disadvantages of Consortiums. Look out for the same article on Joint Ventures.

Consortiums Advantages:

  • Easy to establish as there are no formal procedures... Read More
Free Keyword search

Search all tender notices for FREE!

No subscription or registration required!

You can also search by the reference of the the tender.

Advanced search

Search by Issuer, Region or Sector, individually, or using any combination of the three.