Square Pricing in a Round Hole

When B2B contractors respond to RFPs they often have to place their pricing into customers’ pricing models, e.g., spreadsheets or online forms with built-in formulas.

Sounds easy; just follow the RFP’s directions, place numbers in boxes, and let the customers’ formulas produce the final, submitted bid price.

Here’s the rub: Contractors have their own models to estimate costs and come up with their prices. They sharpen their pencils, peer into all cost factors, and come up with competitive pricing in their model BEFORE completing their customers’ RFP-required model.

Why’s that a problem?

Because customers’ RFP pricing models are not as detailed as contractors’ internal models, they lack the nuance and insight that contractors live by.

While contractors drill down to every contributable cost in their pricing model, customers are typically more interested in the total submitted price – and whether contractors’ costs make sense, e.g., if there’s enough in labor costs, or if profits are in line with expectations.

However, for contractors, last-minute frustrations can occur when filling in customers’ pricing models – because customer and contractor models are rarely the same and their formulas almost never match.

Real headaches come when trying to get the exact price to match a customer model that contractors had already worked out in their own model.

The differences can be quite small, pennies to dollars, a rounding error at best, and are easily and quickly swept under the rug.

However, there can be calculated differences in the 10,000s of dollars, even approaching six figures. And these give rise to stomach-churning “uh-oh’s” that require last-minute reconfigurations, often creating follow-on issues that all must be resolved somehow before pressing send and making the RFP deadline with a second to spare.

Simple Solution Summary

To the degree customers’ models allow, contractors can avoid last-minute, number fudging when they fit their pricing into customers’ models by:

  • First, use customers’ pricing model to calculate their pricing
  • Second, run contractors’ internal pricing model for comparison values
  • Lastly, tweak inputs (not formulas) to customers’ model so that pricing closer aligns to what contractors’ want
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