Proposal Pricing Strategy Guide
Document Type: Guide
Version: 1.0
Last Updated: February 2026
Distribute To: Estimators, Executives, BD Team
Purpose
Provide guidance on strategic pricing decisions to optimize win rates while protecting margins.
Pricing Strategy Fundamentals
Pricing Objectives:
| Objective | When to Use | Trade-offs |
|---|---|---|
| Win the job | Strategic opportunity | May sacrifice margin |
| Maximize margin | Strong position | May lose to lower bidder |
| Market rate | Standard pursuits | Competitive, sustainable |
| Penetration | New market/client | Short-term margin hit |
| Premium | Differentiated value | Requires justification |
Key Pricing Decisions:
- Cost estimation (what will it cost us?)
- Markup/margin (what profit do we need?)
- Strategic adjustment (what does the market demand?)
- Value positioning (what are we worth to the client?)
Cost-Based Pricing
Building Up the Price:
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PRICING BUILD-UP
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Project: _______________________
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DIRECT COSTS:
Labor:
Hours: _____ × Rate: $_____ = $_________________
Materials:
Quantity pricing: $_________________
Subcontractors:
Committed bids: $_________________
Equipment:
Owned: $_________________
Rented: $_________________
Other direct: $_________________
TOTAL DIRECT COSTS: $_________________
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INDIRECT COSTS:
General conditions: $_________________
As % of direct: _____%
Overhead allocation: $_________________
As % of direct: _____%
TOTAL COST: $_________________
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MARGIN:
Target margin: _____%
Margin amount: $_________________
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PRELIMINARY PRICE: $_________________
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Market-Based Pricing
Competitive Analysis:
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COMPETITIVE PRICING ANALYSIS
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Project: _______________________
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HISTORICAL DATA:
Similar projects we've bid:
| Project | Our Bid | Winner | Spread | Notes |
|---------|---------|--------|--------|-------|
| | | | | |
| | | | | |
Average spread from winner: _____%
Our typical position: _____ of _____
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COMPETITOR ANALYSIS:
Expected bidders:
| Competitor | Likely Price Range | Aggressiveness |
|------------|---------------------|----------------|
| | $____ - $____ | H/M/L |
| | $____ - $____ | H/M/L |
Market price estimate: $_________ - $_________
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OUR POSITION:
Cost-based price: $_________________
Market price range: $_________ - $_________
We are: ☐ Above ☐ Within ☐ Below market
Adjustment needed: $_________________
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Value-Based Pricing
Value Differentiation:
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VALUE-BASED PRICING
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Project: _______________________
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OUR VALUE PROPOSITION:
What do we offer that competitors don't?
| Value Element | Our Advantage | $ Value to Client |
|---------------|---------------|-------------------|
| Experience | | |
| Team quality | | |
| Safety record | | |
| Schedule reliability | | |
| Quality | | |
| Communication | | |
| Warranty/service | | |
Total value advantage: $_________________
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CLIENT VALUE DRIVERS:
What matters most to this client?
☐ Price (commodity view)
☐ Schedule (time is money)
☐ Quality (reputation matters)
☐ Relationship (trust important)
☐ Risk mitigation (avoid problems)
Our alignment with their values: ☐ Strong ☐ Medium ☐ Weak
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VALUE-BASED PRICE ADJUSTMENT:
Base price: $_________________
Value premium (if applicable): $_________________
Justified value-based price: $_________________
Can we communicate this value effectively?
☐ Yes - proceed with premium
☐ No - price at market
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Strategic Pricing Adjustments
Adjustment Framework:
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STRATEGIC PRICING ADJUSTMENTS
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Project: _______________________
Base price: $_________________
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ADJUST FOR STRATEGIC FACTORS:
| Factor | Adjustment | Rationale |
|--------|------------|-----------|
| Must-win strategic project | -___% | |
| Key client relationship | -___% | |
| Market penetration | -___% | |
| Capacity utilization need | -___% | |
| Strong competitive position | +___% | |
| High-risk project | +___% | |
| Unfavorable terms | +___% | |
| Tight schedule | +___% | |
| Remote location | +___% | |
| Strong relationship | +___% | |
Net adjustment: _____%
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ADJUSTED PRICE: $_________________
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VALIDATION:
Does this price:
☐ Cover our costs? (Yes required)
☐ Provide acceptable margin? (____%)
☐ Position us to win?
☐ Support strategic objectives?
Final price: $_________________
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Margin Guidelines
Target Margins by Situation:
| Scenario | Gross Margin | Net Margin |
|---|---|---|
| Standard competitive bid | 10-15% | 2-4% |
| Negotiated with good client | 15-20% | 4-6% |
| Strategic/must-win | 8-12% | 1-3% |
| High-risk project | 15-20%+ | 5%+ |
| Time & material | 20-25% | 6-8% |
| Service/small projects | 25-35% | 8-12% |
Margin Floor:
MINIMUM ACCEPTABLE MARGIN:
Below this, we should not bid (except rare strategic cases):
Gross margin floor: _____%
Net margin floor: _____%
Exception approval required from: _______________________
Pricing Scenarios
Scenario Analysis:
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PRICING SCENARIO ANALYSIS
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Project: _______________________
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| Scenario | Price | Margin | Win Prob | Expected Value |
|----------|-------|--------|----------|----------------|
| Aggressive | $ | ___% | ___% | $ |
| Target | $ | ___% | ___% | $ |
| Premium | $ | ___% | ___% | $ |
Expected Value = Price × Margin × Win Probability
Best expected value scenario: _______________________
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SENSITIVITY ANALYSIS:
If we price at $_______________:
Margin if we win: _____%
Revenue if we win: $_________________
Estimated win probability: _____%
At what price would we:
Have 50% win probability? $_________________
Have 80% win probability? $_________________
Hit margin floor? $_________________
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Pricing Review Process
Pricing Approval:
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PRICING REVIEW AND APPROVAL
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Project: _______________________
Estimator: _______________________
Date: _______________________
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PRICING SUMMARY:
Estimated cost: $_________________
Proposed price: $_________________
Gross margin: _____%
Net margin: _____%
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COMPARISON:
| Benchmark | This Project | Difference |
|-----------|--------------|------------|
| Target margin | ___% | |
| Similar projects | ___% | |
| Company average | ___% | |
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STRATEGIC CONSIDERATIONS:
☐ Key client
☐ New market
☐ Capacity need
☐ Competitive pressure
☐ Risk factors
☐ Other: _______________________
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APPROVAL:
☐ Approve as proposed
☐ Approve with adjustment: $_________________
☐ Do not approve - reprice
Approved by: _______________________
Date: _______________________
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Post-Bid Pricing Review
Learning from Results:
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POST-BID PRICING REVIEW
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Project: _______________________
Our price: $_________________
Result: ☐ Won ☐ Lost
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IF WON:
Winning margin: _____%
Were we lowest? ☐ Yes ☐ No
Spread from 2nd: _____%
Did we leave money on table?
☐ Yes - 2nd was close, could have priced higher
☐ No - spread was small
☐ Won on value, not price
Lessons: _______________________
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IF LOST:
Winning price: $_________________
Our price: $_________________
Difference: $_________________ (____%)
Why were we higher?
☐ Estimating (our costs high)
☐ Margin (our margin high)
☐ Scope (we included more)
☐ Efficiency (they're more efficient)
☐ Strategy (they bought it)
Lessons: _______________________
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PRICING ADJUSTMENTS NEEDED:
☐ Adjust estimating approach
☐ Review margin targets
☐ Sharpen specific cost areas
☐ No changes needed
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Related Documents
- Estimating Standards
- Go/No-Go Decision Process
- Post-Bid Analysis
- Overhead Allocation
Template provided by support.construction. Price for value, not just for cost.