Issue Date: 
Thursday, January 31, 2019

2 items that determine tender pricing

Article by Werner van Rooyen

www.howtotender.co.za

31 January 2019

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 is:

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

Direct Cost is the cost 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 Cost will be the money you spend on purchasing the wood for the chairs. Other Direct Cost 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 Cost is the expense that you have to incur to run your business and these costs do not necessarily generate any income. Some of the most common Indirect Cost that your business incurs will be:

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

It is very important to include Indirect Cost 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 Cost.

The question is how to calculate how much of the Indirect Cost is 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 Cost into the tender price. In other words if you have to spend 50% of your time servicing the tender then 50% of your Indirect Cost should be part of your tender price.

To learn more about this and many other tender conditions attend our “Become a Tender Expert” 2-Day workshops presented in Johannesburg, Pretoria, Durban, Port Elizabeth and Cape Town. Book and pay online at www.howtotender.co.za. Please contact Estelle at Estelle@howtotender.co.za should you require more information.

This article was written by Werner van Rooyen, Director of HowToTender (Pty) Ltd which specializes in tender consulting and tender training.

Title Closing Date Tender No.
CapeNature seeks a contractor for the installation of a Water and Waste Water Treatment Solution at the Vrolijkheid Nature Reserve, CIDB and Local content conditions apply 2019-09-13 11:00 WCNCB 01/ 08/ 2019
Plant Pathogen Quarantine Facility Upgrade 2019-09-09 11:00 ARC/ 03/ 07/ 19
The Appointment of a Contractor for The Supply and Installation of Outdoor Gym Equipment, Playground Equipment as well as Outdoor Furniture and Landscape Material for the Rehabilitation of Four ILLegal Dump Sites Within Gauteng Province for a Period of 3-Months -3CE/3GB Or Higher 2019-09-06 11:00 GT/ GDARD/ 051/ 2019
Completion Of Coega Vulindlela Vilage Phase 1C 2019-09-09 12:00 CDC/ 107/ 19A
Supply, deliver, install and commissioning of generators : Illembe District 2019-09-25 11:00 ZNB 9709/ 2019- H
Supply, deliver, install and commissioning of generators : King Cetswayo District 2019-09-27 11:00 ZNB 9704/ 2019- H
Replacement, service and maintenance of lifts (16 units) 2019-09-19 11:00 ZNB 5702/ 2019- H
Supply, deliver, install and commissioning of generators : Zululand District 2019-09-30 11:00 ZNB 9685/ 2019- H
Supply, deliver, install and commissioning of generators : Amajuba District 2019-09-25 11:00 ZNB 9707/ 2019- H
Supply, deliver, install and commissioning of generators : Ethekwini District 2019-09-25 11:00 ZNB 9710/ 2019- H
Supply, deliver, install and commissioning of generators : Umgungundlovu District 2019-09-27 11:00 ZNB 9705/ 2019- H
Supply, deliver, install and commissioning of generators : Ugu District 2019-09-27 11:00 ZNB 9703/ 2019- H
Supply, deliver, install and commissioning of generators : Umkhanyakude District 2019-09-30 11:00 ZNB 9706/ 2019- H
Supply, deliver, install and commissioning of generators : Umzinyathi District 2019-09-30 11:00 ZNB 9708/ 2019- H
Supply, deliver, install and commissioning of generators : Harry Gwala District 2019-09-25 11:00 ZNB 9702/ 2019- H
Supply, deliver, install and commissioning of generators : Uthukela District 2019-09-30 11:00 ZNB 9711/ 2019- H
Term Contract For Turnkey Services for Ground Source Develop (Planning, Design, Geo-Hydriological Studies, Sitting, Drilling, Testing And Equipping) Preventative and Corrective Maintenance Of Bore Holes Together With Water Reticulation : to uMkhanyakude District Health Facilities : KZN Health 2019-09-13 11:00 ZNB 5753/ 2019- H
Supply and Installation of Clear VU Fence 2019-09-18 11:00 SCSC 001/ 2019
Appointment of a Panel of Service Providers To Provide Temporary Residential Accommodation During Disasters / Emergencies, to The KZN Department of Human Settlements’ for a Period not Exceeding 36 Months 2019-08-30 11:00 ZNB52/ 2019/ 20HSE
Tourism Kwazulu-Natal (TKZN) invites tenders for construction of access road, new gatehouse, storm water infrastructure and landscaping at Mandela capture site. The works comprise of a guardhouse, access road, pedestrian walkway, attenuation ponds, and fencing. The works to be executed in 6 months. 2019-09-13 12:00 TKZN NO: 08/ 2019

Pages

Extension of validity period

By Werner van Rooyen

www.howtotender.co.za

31 January 2019

Those of you who are familiar with responding to tenders will know that it is common practice for procuring entities to extend the bid price validity period. We received the undermentioned queries regarding the extension of the validity period of the bid price.

... Read More

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