Quick answer
To price a tender in Australia, add your direct costs, a fair share of overheads, a contingency and your target margin, then add the total cost of finance in dollars for the gap between spending money and being paid. Payment terms change that last line: the same job costs more to deliver at 60 days than at 30. Set a walk-away price before you submit.
Key points
- Price from the bottom up: direct cost, overheads, contingency, finance cost, then margin. Never start from what you think the buyer will pay.
- Payment terms are a cost line. At the same margin, a 60-day-terms job needs a higher price than a 30-day one — in our example about $6,600 higher.
- Commonwealth value for money is not lowest price. The Commonwealth Procurement Rules (updated 17 November 2025) weigh more than price, so a sharp-but-sustainable bid is not a losing bid.
- Commonwealth agencies pay within 20 days of a correct invoice, or 5 days for e-invoices. A new 10 business day maximum is due from 1 January 2027.
- Write down a walk-away price before you submit. If winning needs a lower number, you've priced a loss.
Most owners price a tender by looking at last year’s job, adding a bit and hoping. That works until you win a job where payment lands 60 days after the money goes out. Then the margin you thought you had is quietly spent on funding the work.
Here’s a method that fixes it: build the price from the bottom up, add the cost of funding the gap in dollars, then decide the number you won’t go below.
How do you build a tender price from the ground up?
Five layers, in this order:
- Direct costs. Labour (wages, super, workers compensation, leave loading), materials, subcontractors, plant and equipment hire, travel, permits. Get supplier quotes in writing and date them, because they often expire before a decision is made.
- Overheads. Your share of the costs that don’t appear on the job: insurance, vehicles, software, the person who writes the bid. Use a consistent allocation, such as a percentage of direct cost, drawn from last year’s actual overheads.
- Contingency. A deliberate amount for risk: price rises, rework, weather, scope creep. Size it to the job. A repeat job you’ve done fifty times needs less than a first-time job in a new region.
- Cost of finance. The dollars it costs to carry wages and materials until the client pays. This is the layer most bids leave out.
- Margin. The profit you need, after everything above, for the risk you’re taking.
Add the layers, and you have your cost-plus price. It’s not the price you’ll submit yet. It’s the number the market has to be tested against.
Why do payment terms change your winning price?
Because you pay your people weekly or fortnightly and your suppliers in 14 to 30 days, while the client pays on its own timetable. The longer the gap, the more you fund, and funding costs money whether it’s a line of credit, an overdraft or your own cash that could be earning elsewhere.
For Commonwealth work the gap is shorter than most. Under the Supplier Pay On-Time or Pay Interest Policy, non-corporate Commonwealth entities pay within 20 calendar days, or 5 calendar days for electronic invoices, unless shorter terms are agreed. Finance has announced that from 1 January 2027 the maximum will be 10 business days for all invoice types. The policy applies regardless of contract value (it was once limited to contracts up to $1 million), and agencies owe interest on late payments above $100. Check the Finance policy note for exact wording before you rely on a date.
State agencies, councils and private head contractors set their own terms, and 45 or 60 days from the end of the month isn’t unusual in subcontracting. Our winning government contracts guide covers where to find tenders and how to write a compliant response. This guide is about the number you put in the price schedule.
A worked example (illustrative)
A building-maintenance business tenders for a 12-month service contract. It estimates:
- Direct costs: $30,000 a month, or $360,000 for the year.
- Overheads: 10% of direct cost, $36,000.
- Contingency: 3% of direct cost, $10,800.
That’s $406,800 before finance or profit. The owner asks a funder what carrying the job would cost. For the example, assume it works out at about $6,000 for every 30 days of payment delay across the life of the contract. The owner wants a 10% margin on the price.
| Payment terms | Cost before finance | Finance cost | Total cost | Price for a 10% margin |
|---|---|---|---|---|
| 30 days | $406,800 | $6,000 | $412,800 | $458,700 |
| 45 days | $406,800 | $9,000 | $415,800 | $462,000 |
| 60 days | $406,800 | $12,000 | $418,800 | $465,300 |
Same job, same crew, same margin target. The price rises $6,600 from 30 to 60-day terms purely because of when the money arrives.
Now the mistake. Suppose the owner prices at $458,700 (the 30-day number) but the contract pays at 60 days. Cost is $418,800, so profit is $39,900. That’s 8.7% on the price, not 10%, or about $5,970 less than planned. On a rival bid at $450,000 and 60-day terms, profit would be $31,200, about 6.9%, and every extra week of delay or $1,000 of rework comes straight out of it.
The test: a price is only worth submitting if the payment terms written into the tender are the ones in your calculation. Put your own numbers through the Growth ROI calculator to see the total cost of finance in dollars against the gross profit the contract adds.
What’s your walk-away price?
Before you submit, write down three numbers:
- Target price: your cost-plus number at your target margin.
- Floor price: the lowest price that still covers all costs including finance and leaves a minimum margin you’ll accept, say 5%.
- Walk-away price: your total cost (in the example, $418,800 at 60 days). At or below this, you lose money on every day of delivery.
If the market only supports a price under your floor, the answer is not to shave the contingency to make the sums work. It’s to pass, or to ask whether the scope, the terms or the security requirement can change. Do the stress test on your plan first: what happens to the margin if payment runs 30 days late and costs rise 5%?
Is the lowest price always the winner?
Not with Commonwealth work. The Commonwealth Procurement Rules centre on value for money, which officials assess across more than price. The Department of Finance’s current rules took effect on 17 November 2025 and added a factor for suppliers’ ethical conduct to the value-for-money assessment. State portals apply their own evaluation frameworks, but the pattern is the same: quality, capability, risk and delivery count.
For you, that means:
- Don’t chase the lowest number. A bid that looks too cheap raises delivery-risk flags with evaluators.
- Show what the price includes. A clear schedule of rates, assumptions and exclusions often scores better than a bare total.
- Spend effort on the non-price criteria. Case studies, named key personnel and a credible risk plan move your score without moving your margin.
Check the evaluation criteria and weightings in each tender pack. They tell you how much price is worth against everything else.
What costs do owners forget in a tender price?
- Tender security or bank guarantee fees, and the cash or property tied up behind them until release.
- Mobilisation: inductions, tickets, vehicle signage, extra insurance cover, site set-up.
- Escalation: whether the contract lets you pass on award increases. Awards rise each 1 July, which can fall mid-contract.
- Retention or holdbacks that delay the last slice of payment.
- Invoice rejection: a missing purchase order number can add days to a payment. Treat a correct invoice as part of delivery.
- Bid cost itself, especially for multi-stage tenders. Divide it by your win rate to see what each win really costs.
How do you tender when the work needs more cash than you have?
Sometimes the maths works but the funding doesn’t: the job is sound, and the gap before payment is bigger than your account. That’s a funding question, and the answer depends on the contract. Equipment for the job suits equipment finance; wages and materials before the first invoice suit a line of credit or working-capital facility. Our big contract funding playbook lays out the options.
If you want a number to price into your bid before you submit, check your funding options. Enquiring takes about a minute, and it won’t touch your credit file.
Frequently missed: price the stretch, not the average
Averages hide the squeeze. Your funding need peaks in the weeks when you’ve paid wages for the month and invoiced but not yet been paid. Price the peak. A contract that looks like $38,000 a month of income can need $90,000 of working capital at its deepest point, so check the total cost of finance on the peak balance rather than the monthly average.
Also check what the job does to your gross margin overall. A big contract at a thin margin can pull your blended gross margin down and use capacity that a better-paying customer could have filled.
Ready to price the bid with the funding sorted?
Bids are won on preparation. If you know your cost, your payment terms and the walk-away number before you submit, you can bid with confidence, and know where the cash is coming from if you win.
When you’re ready, tell us about the contract: the value, the payment terms and what you need to deliver it. The form takes about 60 seconds, and there’s no credit check when you enquire, so asking costs you nothing but a minute. We don’t send your details to a pile of lenders; a real person reads your situation and calls you. Please fill the form in accurately, because the closer the details are to the real contract, the better we can match the right funding the first time.
Frequently asked questions
How do you price a tender in Australia?
Start with direct costs (labour, materials, subcontractors, plant), add an allocation of overheads, a contingency for risk, and the cost of financing the gap until you're paid, then add the margin you need. The result is your break-even-plus-target price. Compare it with the budget signals in the tender documents and decide whether the job is worth bidding at that number.
How much margin should I put in a tender?
There's no universal figure because it depends on industry, risk and your overheads. A useful method is to set a net margin that covers the risk you're taking, then test it: if costs rise 5% or payment arrives 30 days late, does the job still make money? If not, the margin is too thin. Work from your own gross margin on similar completed jobs rather than a rule of thumb.
Should I include the cost of finance in a tender price?
Yes, if delivering the work means you fund wages, materials or subcontractors before you're paid. That cost is real and predictable, so it belongs in the price. Show it inside your rates or as part of overheads. Don't build it in as a separate line unless the tender form asks for a breakdown.
How quickly do Commonwealth agencies pay invoices?
Under the Supplier Pay On-Time or Pay Interest Policy, non-corporate Commonwealth entities pay within 20 calendar days, or 5 calendar days for electronic invoices, unless shorter terms are agreed. Finance has announced a maximum of 10 business days for all invoice types from 1 January 2027. State agencies and private head contractors have their own terms, which are often longer.
Is the lowest price always the winner in a government tender?
No. The Commonwealth Procurement Rules ask officials to achieve value for money, which weighs price alongside quality, fitness for purpose, risk and other considerations. Since the 2025 update this includes the supplier's ethical conduct. State rules differ but follow the same principle. A credible, well-evidenced bid at a sustainable price often beats a cheap one that looks risky.
What is a tender security or bank guarantee, and does it affect my price?
Some tenders or contracts require security, often a bank guarantee, to cover performance. It usually carries a fee and may tie up cash or security. Include that dollar cost in your overheads or finance line, and check the terms of release so you know how long the cost runs.
What happens if I underprice a tender?
You're generally held to the price you submitted. A job that wins at break-even leaves no room for rework, delays, or a late payment, and one bad contract can pull down profit on the rest of the business. Setting a walk-away price in advance is the simplest protection.