Price too low once in federal contracting, and every agency downstream will expect the same number.
In this episode of Spilling the Tea on GovCon, Teresa Moon welcomes back Marsha Lindquist, Strategic Pricing Leader and Founder of Granite Leadership Strategies, for a conversation on what strategic pricing means, where contractors go wrong with it, and what it takes to get it right in a fixed-price environment.
Listen at your favorite platform here:
Here’s a quick rundown:
The federal environment has moved further into fixed-price contracting by executive order, which means pricing errors can’t be fixed on the back end. Contractors who win regularly build pricing into the proposal from the start, giving themselves time to assess risk, substantiate the number, and align it with the customer’s buying priorities.
Marsha has spent over three decades in government contracting focused on strategic pricing and cost accounting, and wrote the book on the subject: Secrets of Strategic Pricing for Government Contractors. The conversation covers the five-part pricing cornerstone she uses with her best clients, the difference between Strategic Pricing® and Price to Win, the risk and profitability work most contractors skip, and the biggest pricing mindset shifts small businesses need to make when moving from commercial to federal.
A few takeaways from the conversation:
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Strategic Pricing® is not the same as “Price to Win”: The two get used interchangeably in GovCon, and Marsha spends the first part of the conversation drawing the line between them. One looks outward at the market, the other inward at your own operation, and hiring one consultant to do both is where contractors get into trouble.
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The five-part pricing cornerstone: Marsha only runs her full engagement with her strongest clients, and it’s built on five pieces: a strategic pricing plan, a business value statement, a risk analysis, a profitability analysis, and a business value introduction. She walks through what each one does and why they have to work together.
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Risk analysis means pulling out the dirty laundry: Most leaders assume they already know their risks. Marsha’s view: a proper risk analysis means digging into the costs, assumptions, and failure modes nobody wants to look at, including the unallowable costs that have ended companies when they went uncovered.
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Monetize the value that isn’t price: When a customer cares more about delivery, trained people, or risk reduction than cost, cutting your price doesn’t win the bid. Marsha walks through how to monetize those advantages and show customers the dollar value of what you bring beyond the number.
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The lowest-price trap compounds across agencies: Government agencies share pricing data. Set a number too low for one agency, and future buyers see it and expect it to hold, even when the work demands more.
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Pricing belongs at the start of the proposal: Most contractors leave pricing to last and run out of time to think strategically. Marsha’s rule: start pricing when you start researching the opportunity.
Bottom line: In a fixed-price world, the margin for pricing error is shrinking. Marsha’s take: start the pricing conversation when you start the proposal, and build the strategy before you build the number.
Listen to the full conversation here: https://youtu.be/MIuAUMKqZMs