Most lost bids are not lost on price alone — they are lost on the bid pricing mistakes hiding inside the price. A bid can be too high, too low, or internally inconsistent, and each of those failures traces back to a small number of repeatable errors. The good news is that these errors are predictable. Here are the seven most common bid pricing mistakes that lose contracts — and how to avoid each one.
1. Pricing Salary Instead of Loaded Cost
The single most expensive mistake a new contractor makes is pricing labour at the employee’s salary. A $50,000-a-year employee does not cost $50,000: add fringe benefits, payroll taxes, overhead, and G&A, and the real cost is often $85,000 to $100,000. Bid the salary rate and you will win work that loses money on every hour. Always price labour at the fully loaded rate — salary plus fringe, plus overhead, plus G&A — and check your indirect rates every year so the loaded rate stays honest. Our beginner’s guide to indirect rates explains how to calculate each pool correctly.
2. Underestimating the Hours
The second mistake is underestimating how many hours the work actually takes. Bidders price the deliverable and forget the work around it: agency review cycles, security and badging, meetings, status reports, revisions, and travel. On a services contract, the overhead of working with the government can add 20 to 30 percent to the hours the core task requires. Estimate from evidence: your own past hours on similar work, or the incumbent’s staffing levels where you can learn them from past award data. Then add a realistic allowance for the review and reporting burden the RFP describes. A price built on optimistic hours is a price that fails the realism check — or wins and bleeds.
3. Forgetting Costs Entirely
Whole cost categories get left out of bids. Travel is the classic one: the RFP requires monthly on-site meetings in three cities, and the price includes no travel line. Others include software licences, background investigations, equipment, training, subcontractor markups, and the cost of the proposal effort itself where it is recoverable. The fix is a checklist: before you finalise the price, walk the statement of work line by line and ask, for each requirement, “what does this cost, and where is it in the price?” Our proposal compliance checklist includes a price cross-check that catches exactly these gaps.
4. Ignoring Escalation on Multi-Year Contracts
A three-year contract priced at today’s rates will lose money in years two and three. Salaries rise, benefits get more expensive, and inflation does not pause for the period of performance. Every multi-year bid needs escalation — a year-over-year increase in labour rates, typically 2 to 4 percent — built into each option year. The same applies to subcontractor rates and to any multi-year licence or service cost. Forgetting escalation is a slow mistake: the bid looks fine on award day and the margin disappears a year later, when it is too late to renegotiate.
5. Pricing to the Ceiling, or to Win at Any Cost
Two opposite mistakes share one root: pricing to a number that has nothing to do with your costs. Pricing to the ceiling — setting your price at the RFP’s stated budget or not-to-exceed amount with no cost justification — looks padded to evaluators and wastes the competitive advantage a lower, honest price would give you. Pricing to win at any cost — cutting the price below your real costs to be the lowest bidder — is worse: it can trigger a realism finding and lose you the award, and if you do win, you have bought yourself a contract that loses money for its whole life. Build the price from your costs, then compare it to the market. Never work backwards from a target number.
6. The Arithmetic Error and the Inconsistent Volumes
Spreadsheet errors have lost more awards than most bidders admit. A formula that sums the wrong range, a rate pasted into the wrong column, a total that does not match its parts — any of these can make your price indefensible, and evaluators do check the arithmetic. Just as damaging is inconsistency between the volumes: the price funds 1,760 hours while the technical volume promises 1,920, or the price uses junior rates for staff the management approach describes as senior. The fix is process, not talent: have a second person reconcile the price volume against the technical and management volumes, cell by cell, before submission. It takes an hour. It has saved contracts.
7. Bidding Without Research
The seventh mistake is bidding blind: submitting a price with no idea what the government has paid for similar work, who the incumbent is, or what the competitive range looks like. A price built in a vacuum is a guess, and guesses are wrong in both directions — too high and you lose, too low and you lose money or fail realism. Before you price, do the research: past award prices, the incumbent’s contract value, the scope of the work as written. Our guide on how to price a government contract bid walks through the research step, and the guide on finding incumbent contractors shows how to learn who did the work last time. A researched price is a defensible price.
How to Catch These Mistakes Before Submission
Build a short pre-submission routine and use it on every bid. First, reconcile the price against the technical volume — hours, staffing, subcontractors, and period of performance must match. Second, check the arithmetic with a second person. Third, verify that every cost in the statement of work appears somewhere in the price. Fourth, confirm escalation is in every option year. Fifth, compare the total against your research — if it is far outside the expected range, find out why. And sixth, read the basis of estimate as if you were the evaluator: could you follow it, check it, and trust it? If any step fails, fix it before the price goes in. The price is the one part of your proposal the government will hold you to for the entire life of the contract — it deserves the same care as everything else you submit.
Related Guides
Bid Pricing Mistakes: Catch Them Before You Submit
Most bid pricing mistakes are easy to spot once you know what to look for. Run your loaded rates, your hours and your escalation assumptions through a second pass before you submit, and compare the result with the ceiling price and the rates you actually pay. The bid pricing mistakes that survive that check are usually the ones nobody looked for — a forgotten cost category, a rate that never got updated, or a volume that does not match the technical proposal. Catching bid pricing mistakes is mostly a matter of slowing down before you hit submit.
If you want a routine that catches bid pricing mistakes every time, start with our guide on how to price a government contract bid and our guide on how to build a price proposal, then check the cost rules in FAR Part 31. A review like that takes an hour — and it is the cheapest insurance against bid pricing mistakes you will ever buy.
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