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Price-to-Win: The Trade-off Between Capabilities & Price

Competitive analysts studying

A big part of winning a deal in the federal marketplace depends on how effective your PTW (Price-to-Win) strategy, or position, is. Keep in mind that a winning PTW position starts with a bottom-up analysis based on the requirements spelled out in the solicitation documents, but it doesn’t stop there. In order to arrive at an effective PTW strategy, you also need to consider open-source data and a set of defensible assumptions…

…which brings me to the most important thing about Price-to-Win. PTW isn’t a number. It’s not the amount you need to bid to win the deal. Think of PTW as a strategy or a position that represents the trade-off between the capabilities you offer within the context of your understanding of the customer’s requirements, and the cost, price, and strategy they will use to evaluate proposals. (Also keep in mind that what is used in government contracting is an artificial construct meant to create an “apple to apples” comparison.)

It’s important to keep in mind that we bid on work for different reasons, and the price we submit reflects those motivations. If our objective is to win the deal at all costs, we will offer to perform the contract’s requirements at a price that’s well below what we expect everyone else to offer. I’ve heard of federal contractors positioning themselves to win jobs at all costs to inflate the company’s value in light of a near term sale. Companies who are entering a new marketplace who want to take the field by storm may be willing to offer an extremely low price in order to make a splash, get their foot in the door, and earn a little brand recognition. And in those cases when we are asked to bid by a customer who is concerned about the level of competition, our courtesy bid is likely to be too high to win.

Depending on your motives, you can throw something over the transom that’s either artificially high or low to protect yourself against the win or to maximize your chances of being awarded the contract.