Pricing a public sector bid is one of the most stressful parts of tendering for design and digital agencies. Get it too high and you lose on price. Get it too low and you win work that destroys your margin. And unlike private sector projects, you often have no access to the buyer beforehand to sanity-check your assumptions.
This guide explains how public sector procurement evaluates price, how to structure your bid financials, and how to price competitively without racing to the bottom.
How Public Sector Buyers Evaluate Price
Before you set a number, understand how it will be scored.
Most public sector tenders use a quality-price split — typically 60/40 (quality to price) or 70/30. Some frameworks go as high as 80/20 or even 90/10 for complex creative or research work. A few go 50/50. For a detailed breakdown of how evaluators apply these weightings and score individual quality criteria, see our guide to public sector evaluation criteria.
What this means in practice:
- If the split is 70/30, price is only 30% of your total score. A strong quality submission can outweigh a mid-range price.
- If the split is 60/40, price matters significantly — a 10% cost difference can swing the outcome.
Always check the evaluation criteria section of the Invitation to Tender (ITT) for the exact split. This tells you how much energy to spend defending your pricing in the narrative sections.
The lowest price wins point
A common misconception: the lowest bid wins. This is not true in most UK public sector tenders. Buyers use a normalised pricing model, where the lowest valid bid gets the maximum points, and other bids are scored proportionally. A bid that is 20% more expensive than the cheapest valid bid might score 80% of the maximum price points — which, in a 70/30 split, costs you only 6 percentage points overall.
Abnormally low bids can also be questioned or rejected. Buyers are required to investigate bids that appear unsustainably cheap. If your pricing is significantly below the market, expect a clarification request asking you to explain how you'll deliver the work at that cost.
What to Include in Your Bid Price
Public sector contracts vary, but most design and digital tenders will ask you to break down costs in one or more of these ways:
Day rates by role
This is the most common format, especially for frameworks like DOS7 (Digital Outcomes and Specialists). You'll submit day rates for each role type: lead designer, service designer, content designer, user researcher, delivery manager, etc.
Key points:
- Day rates on DOS7 are public and searchable. Buyers benchmark against the market rate. Check existing supplier rates on the Crown Commercial Service website before submitting.
- Set realistic rates that reflect your actual cost base plus margin. Lowballing day rates damages the market and often triggers clarification.
- If you're responding to a specific opportunity (a call-off from a framework), the day rate you quoted at framework registration is what you're held to — you cannot inflate it for individual projects.
Fixed-price deliverables
For non-framework open tenders, buyers often want a fixed price for the scope of work. This removes budget risk from the buyer and transfers it to you.
For fixed-price bids:
- Break the price down into phases (discovery, alpha, beta, delivery) even if the buyer hasn't asked. It shows rigour and makes your number defensible.
- Document your assumptions clearly. If you're pricing on the basis that stakeholder access is provided within 48 hours of request, say so. If the scope changes, you need a written basis for variation.
- Include a contingency line (5–15% of total) in your internal calculation — but be careful whether the tender allows you to include it visibly. Some buyers will mark you down for an explicit contingency; others expect it.
Expenses and additional costs
Always clarify whether travel, software, licences, or research recruitment costs are included in your price or chargeable as expenses. If these are ambiguous, include a line in your pricing notes. A tender that looks cheaper on paper but carries significant hidden expense recovery is a competitive risk.
How to Benchmark Your Pricing
Three practical approaches:
1. DOS7 rate benchmarking. Crown Commercial Service publishes the day rates of all suppliers on the DOS7 framework. Search for competitors in your specialism to understand the range. Avoid the temptation to undercut the lowest rate — this positions you in a race to the bottom and raises buyer concern about quality.
2. The internal cost floor. Calculate your actual cost per day: salary (including NI, pension), overhead allocation, management time, and a contribution to non-billable business costs. Your floor is this number. Never bid below it.
A rough check: if a designer costs you £500/day all-in (salary + employer costs + overhead), your minimum viable day rate is £500 + target margin. Most agencies target 30–50% margin on public sector work. That implies a minimum rate of £650–£750/day for that role.
3. Qualitative calibration. Talk to peers in agency networks. Agency Hackers, DBA, and the Agency Collective regularly surface conversations about market rates. What other agencies are quoting for comparable work is your most useful real-world reference.
Common Pricing Mistakes
Quoting a single lump sum without breakdown. Buyers are required to assess value for money. A single number gives them nothing to assess. Always provide a breakdown, even if the tender doesn't require one — it builds confidence and makes negotiation easier if there's a contract discussion.
Forgetting VAT. Most public sector bodies are not VAT-registered and cannot recover VAT. Confirm whether your quoted price is inclusive or exclusive of VAT and state it clearly. Getting this wrong can disqualify you or create a pricing gap in final negotiations.
Under-pricing discovery. Discovery phases are often treated as loss leaders by agencies. This is a mistake. Discovery requires the same quality of staff as delivery, and buyers who receive cheap discovery end up with poor findings that undermine the whole project. Price discovery at full rate — and use your bid narrative to explain why good discovery is an investment, not a cost.
Ignoring inflation and payment terms. Public sector contracts often run 12–24 months. If you're quoting fixed rates, build in an escalation clause or state that rates are valid for 12 months only. Also check payment terms: many public sector contracts run 30 days, some run 60 or 90. Factor working capital into your pricing.
Writing the Pricing Narrative
Many tenders include a section asking you to explain your pricing and demonstrate value for money. Don't treat this as a formality.
A strong pricing narrative:
- Explains the team composition and why it's sized correctly for the scope
- Articulates what the buyer gets for the investment (outputs, outcomes, risk reduction)
- Addresses any notable line items (e.g. user research recruitment costs, software)
- Shows that you understand the value of the outcome, not just the cost of the input
A weak narrative lists the roles and says "we are competitive." That tells the buyer nothing.
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Price vs Value: the positioning choice
You have a strategic choice when pricing public sector work: compete on cost, or compete on value.
Agencies that compete on cost need high volume, tight process, and low overhead. It can work, but it's a difficult model for a 10–50 person creative agency.
Most successful design agencies in public sector compete on value: deep domain expertise, better user research, stronger evidence of impact, more efficient delivery. If you have a genuine track record in your sector — NHS, education, central government — your pricing should reflect that. Buyers pay a premium for agencies who already understand their domain. Not knowing what a Caldicott Guardian is, or why a GDS discovery follows a specific arc, costs buyers time and money. Your knowledge is worth something.
Price accordingly. And if a buyer's scoring model doesn't reward quality expertise, that's useful information about whether the contract is right for you.
Finding the right tenders to price is where most agencies lose time before they even open a spreadsheet. Monitoring Contracts Finder, FTS, Public Contracts Scotland, Sell2Wales, and eSourcing NI manually across multiple windows is how BD managers spend hours every week.
Tandara does this automatically. Our daily digest filters every new tender across UK procurement portals, scores it against your agency's profile, and surfaces the ones worth bidding — so your team spends time on pricing and writing, not portal-watching.
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