How do I price a government contract?

Government contract pricing is a specific discipline, different from commercial quoting. The three most common contract structures are firm-fixed-price (FFP), time-and-materials (T&M), and cost-plus-fixed-fee (CPFF). Each has its own pricing math and its own risk profile.

For firm-fixed-price contracts (most services and construction), you calculate the direct labor cost (hours × loaded hourly rate), add direct non-labor (materials, travel, subcontractor cost), apply an indirect rate for overhead and G&A, and add fee (typically 6-15% depending on risk and complexity). Loaded rate means the fully-burdened cost — base salary + payroll taxes + benefits + fringe. Under-loading rates is the #1 rookie mistake and quickly turns "winning" bids into money-losing contracts.

For time-and-materials, you propose labor category rates that already include all burdens and fee. There is no separate margin — profit is baked into the rate. The government pays the actual hours worked, capped by the ceiling in the contract. T&M is common for staff augmentation and support contracts.

For cost-plus (CPFF, CPIF, CPAF), you propose your fully-documented indirect rates, submit them to DCAA for audit if required, and add a fixed or incentive fee. The government reimburses actual allowable costs plus the negotiated fee. Cost-plus is typical for R&D, complex integration, and long-term services where scope is uncertain.

Match pricing to the evaluation method. Lowest Priced Technically Acceptable (LPTA): sharpen your rates to be competitive, but never below your break-even. Best Value: don't try to be lowest — bid at market rates and let technical strength justify the price. Trade-off / performance price: price to the middle of the pack and win on non-price factors.

Support every price with a basis-of-estimate (BOE) document. For each labor category, cite the rate source (published salary survey, current internal payroll, historic bid data). For each material, cite the vendor quote or catalog. For each subcontractor, cite the sub's quote letter. Agencies do cost realism reviews on best-value bids — a bid that lowballs labor to win price points but cannot support the numbers will be found "unrealistic" and marked down.