Even experienced bidders make pricing mistakes that cost them contracts or, worse, result in winning a contract at a price that cannot be sustained. This module documents the ten most common pricing mistakes observed in South African government tender submissions, with specific advice on how to avoid each one.
Mistake 1: Arithmetic errors in the pricing schedule. Summing rows and columns incorrectly, extending quantities by unit rates incorrectly, or using a different VAT rate from the prescribed 15% are all common and frequently fatal. The safest mitigation is to use a formula-driven spreadsheet for all pricing calculations, have a second person check every formula, and then manually verify at least a sample of the extended calculations before transferring figures to the official SBD3.3.
Mistake 2: Ignoring the pricing schedule format. Many procuring institutions provide a specific pricing schedule format that bidders must use. Submitting your own pricing format instead of the prescribed one — even if it contains the same information — is grounds for disqualification in many institutions. Use the prescribed format always; if it is unclear, contact the supply chain unit for clarification before the closing date.
Mistake 3: Missing VAT or treating it inconsistently. Some line items in a pricing schedule are priced inclusive of VAT and others exclusive; some sub-consultants are VAT-registered and others are not. Failing to track VAT treatment consistently across the entire pricing schedule results in prices that are internally inconsistent and may not reflect what you actually intend to charge. A clear VAT treatment rule — all prices exclusive, or all inclusive, with a separate summary — should be applied throughout.
Mistake 4: Underpricing due to incomplete scope understanding. Reading only the bid invitation notice and pricing without thoroughly reading the full terms of reference is a common shortcut that leads to underpricing of scope. Deliverables buried in annexures, reporting requirements, travel obligations, insurance and guarantee requirements, and mobilisation timelines all have cost implications. Read the full document set before pricing.
Mistake 5: Not pricing optional items. Many pricing schedules include optional items or provisional sums that may or may not be exercised. Some bidders leave these blank rather than pricing them. A missing price on a provisional sum may result in the item being priced at zero for evaluation purposes, potentially making your overall evaluated total non-comparable with other bidders who priced it.
Mistake 6: Scope creep pricing — failing to price for contract management overhead. For long-term contracts, the cost of contract management, reporting, stakeholder liaison, and quality assurance is substantial but is often not explicitly stated in the terms of reference. Experienced bidders build a contract management overhead into their pricing; inexperienced bidders discover this cost after award.
Mistake 7: Currency risk for USD or EUR-denominated inputs. If any of your costs are in foreign currency — imported equipment, offshore sub-consultants, international licences — your price in ZAR is exposed to exchange rate movement between the bid date and the delivery date. Either hedge the currency risk, include a contractual foreign currency adjustment mechanism, or price with an explicit exchange rate buffer.
Mistake 8: Forgetting about payment terms and cash flow. Government payment cycles are often 30 to 90 days, and some institutions are slower. If you have front-loaded costs (mobilisation, equipment purchases, upfront material procurement), the gap between spending and receiving payment creates a working capital requirement that has a financing cost. This cash flow financing cost must be included in your price, not absorbed as a reduction to margin.
Mistake 9: Not adjusting for local content requirements. For designated sectors and products, failure to price the cost of achieving the minimum local content threshold — including the cost of sourcing locally rather than importing cheaper alternatives — results in a technically non-compliant price that may be rejected or re-evaluated.
Mistake 10: Submitting a price that you have not verified can be delivered profitably. The final check before submission is to confirm, on a worst-case scenario basis, that the price you have submitted allows you to deliver the full scope and still cover all costs, overheads, and financing charges while generating a net positive margin. If the worst-case scenario is a loss, either reprice or withdraw from the bid.