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Cost And Pricing

Baskar Sundaram
Baskar Sundaram

Cost and pricing data are developed based on past performance and customers’
perceptions of value. Cost and pricing are highly dependent on the setting. Bid for
government agencies and pseudo-government entities often have strict regulations
regarding cost and pricing data. When bidding for government procurement, make
sure to understand acquisition rules and regulations. Showing what your price
comprises demonstrates your logical approach and gives credibility to your proposal.
In a commercial setting, having a logical approach to your pricing is proved when you
provide some details of what your price represents in both true numbers and graphic
form.
Distinguish between Price, Value, and Added Value
Price is what you charge a customer for a product or service. Value is what your
customer perceives your product or service is worth. Customer’s perceived value ≥
customer’s budget ≥ your price ≥ your cost. Added value is defined as the difference
between the customer’s perceived value of a solution and the price they pay, plus any
implementation costs. Customers often choose solutions that offer the greatest added
value. Convey to the customer that without you as their choice, they might waste time,
money, or their own implementation efforts.
Present Cost and Pricing Data in a Summary Form
Presenting a cost section executive summary is essential to gaining credibility and
making your value proposition a complete circle with the technical proposal. A
summary version of cost detail makes the evaluator’s job easier.
In your summary, make sure you reach as many of these objectives as possible:
 Total costs or prices in graphics and narrative (many customers want to see the
bottom line up front)
 Price of key assumptions (not every cost assumption, but the major, important
ones)
 Overall themes
 Price discriminators
 Cost or price implications of choosing your approach
 Your positive approach to the logic and reasonableness of your costs and
prices
 Cost tracking and control systems
 The story of basis of your estimates.

Use Graphics to Clearly Convey Value
Use graphics, tables, and charts to quickly give the reader a snapshot of the message
you are delivering. For both the customer and your own senior management, you can
use graphics to gain swift understanding and faster acceptance of the cost and
pricing data you present.
Quantify all Claims with Measurable Data
Cost relies upon facts rather than judgment. Your facts validate what you are claiming
and lend credibility to your organization. Justify and build your case for your costs
with your past performance historical information. Seek other organizations’ historical
data where you are lacking information and use that data to generate your gaps.
Accurate and complete cost data are best estimated using a bottom-up basis of
estimates

Read more about the course here.

Cost and Pricing Data (Bite Size)

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