Pricing a small works tender — a worked example
Most government works tenders in India are item rate or percentage rate: the department publishes quantities and often a schedule of rates, and you quote either your rate against each item or a single percentage above or below their estimate.
Either way the arithmetic behind your number is the same. This walks through it with an illustrative ₹40 lakh building repair contract. The figures are examples, not rates — yours come from your own suppliers, labour and site.
1. Start from quantities, not from the estimate
Read the BOQ against the drawings and satisfy yourself the quantities are right. Where a quantity looks wrong, that is a pre-bid question — and a clue about how the estimate was prepared.
Note the items that carry the money. In most small works, five or six items are 70–80% of the value; those are the ones to price carefully. The rest can follow the schedule.
2. Build a rate for each major item
For each, work out what it costs you:
- Material — delivered to site, including wastage. Get quotes; do not use last year's prices.
- Labour — your gang's output per day for that item, at today's wages, including the contribution you actually pay for EPF and ESI.
- Plant — hire or ownership cost per day, plus fuel and operator.
- Lead and lift — carting distance, and lifting to floor level. Departments' schedules make assumptions here that may not match your site.
Illustration, for one item of brickwork:
| Material per m³ | ₹4,800 |
|---|---|
| Labour per m³ | ₹1,900 |
| Plant, scaffolding, sundries | ₹300 |
| Works cost | ₹7,000 per m³ |
3. Add site overheads
Costs that belong to the job but not to any single item: site supervision, watchman, temporary sheds, water and power, safety, testing, tools, insurance. On a small works contract this commonly runs 5–10% of works cost, and it is the item most often forgotten.
4. Add office overheads and finance
Your establishment — office, accounts, the estimating time that went into this bid, the bids you lose — plus the cost of money. That cost is real and specific to government work:
- EMD blocked from bid until award.
- Performance security of 5–10%, with bank margin and commission.
- Retention deducted from each bill.
- Payment delay — from bill submission to money in the account. If that is 90 days in this department, you are financing the work for three months.
Put a number on it. At 12% a year, financing ₹10 lakh for three months is ₹30,000 — on a ₹40 lakh job that is nearly 1% of the contract, before anything goes wrong.
5. Add profit, then decide
Profit is what is left after everything above is covered. If your target is 8% and the competitive rate in your area is 3% below estimate, the question is not "what profit do I want" but "can I do this work for that price and still make anything".
Running the illustration:
| Works cost (all items) | ₹32,00,000 |
|---|---|
| Site overheads at 7% | ₹2,24,000 |
| Office overheads at 5% | ₹1,71,000 |
| Finance cost | ₹35,000 |
| Cost to complete | ₹36,30,000 |
| Profit at 8% | ₹2,90,000 |
| Your price | ₹39,20,000 |
Against a department estimate of ₹40,00,000, that is a bid 2% below estimate. If others are bidding 8% below, either they know something about the site that you do not, or they are pricing work they will struggle to finish.
6. Taxes, separately
GST is not part of your rate unless the tender says it is. Read the tax clause: some notices ask for rates inclusive of GST, others exclusive with tax paid extra.
Works contracts for government departments are generally taxed at 18% since the concessional 12% rate was withdrawn — for government entities and authorities from 1 January 2022, and across government works by Notification 03/2022-Central Tax (Rate) of 13 July 2022. Rates and exceptions change; confirm the position for your contract with your chartered accountant.
Where a contract signed under the old rate ran into the new one, departments issued circulars about reworking estimates. If you hold such a contract, that is a conversation with the department, not a matter of absorbing the difference quietly.
7. Before you submit
- Check the arithmetic in the BOQ file itself — the portal totals it, and a decimal error in a large item is unrecoverable once the bid is frozen.
- Sanity-check the total against your own estimate of cost to complete. If the two differ wildly, find out why before you sign.
- Ask yourself what your price assumes about site access, water, power and land. Those assumptions are what turn a won tender into a loss.
The discipline that matters
The contractors who last are not the ones who win the most tenders. They are the ones who walk away from the ones priced below cost — which you can only do if you know your cost.
A caution
Every figure here is an illustration. Rates, overhead percentages, finance costs and competitive margins differ by trade, state, department and year, and tax positions change. Price from your own costs, and take tax advice from your accountant. Nothing here is financial, tax or legal advice.