Guides / Pricing and writing the bid
How to price a multi-year public service contract
Pricing a two to five year public service contract: your real costs, escalation, price adjustment clauses, unit rates or lump sums, and checking your number.
Short answer
Price a multi-year public contract from your real cost per year, not last year's rates. Build up labour, supervision, equipment, materials, travel, insurance and overhead, then add profit. Read whether the contract allows yearly price adjustments; if it doesn't, build expected wage and cost increases into every year you price. Check the result against past awards where you can.
Public service contracts often run two to five years, sometimes with option years on top. That's the attraction: steady work. It's also the risk: a price that works today can lose money in year four. Here's how to build a number you can live with for the whole term.
Start from cost, not from the going rate
Build the price up from what it will actually cost you to do the work as the tender describes it.
- Labour hours. Work out hours per visit or per month from the scope: square footage, number of sites, frequencies, service levels. Then multiply by your loaded labour rate: wages plus employer costs such as CPP, EI, vacation, statutory holidays and WorkSafeBC premiums.
- Supervision and admin. Who checks the work, handles the buyer's calls, writes the monthly report and goes to the start-up meeting? Their time is a cost.
- Equipment. Purchase or lease, maintenance, fuel, and backup units if the tender requires them.
- Materials and consumables. What the tender says you supply.
- Travel. Time and vehicle cost between your yard and every site, every visit.
- Contract-specific costs. Insurance at the tender's limits, bonding, licences, background checks, uniforms, reporting systems, training.
- Overhead. Your share of rent, office, accounting, software and the owner's time.
- Profit. Decide it on purpose. It's not what's left over.
Read how the price can change over the term
Find the price adjustment clause, if there is one. It usually takes one of these forms:
- Fixed for the whole term. Your year-one rates apply in year five. Build expected increases in now.
- Fixed rates per year. The pricing form asks for a separate price for each year. Price each year honestly; don't enter the same number five times.
- Indexed adjustment. Prices change each year by an index such as the Consumer Price Index, sometimes capped. Check whether the index tracks your real costs. Wages in your trade can rise faster than general inflation.
- Adjustment on request. You can ask for an increase at renewal, but the buyer can say no. Treat this like fixed.
Option years matter too. If the buyer can extend at the same price, your last-year price has to work in the extension years as well.
Unit rates or lump sum?
Use the structure the pricing form asks for. Each has its own trap:
- Lump sum (one price per month or per year): you carry the risk if the work takes longer than you thought. Read the scope closely for anything that could grow.
- Unit rates (per hour, per visit, per square metre, per event): you're paid for what you do, but the buyer evaluates on estimated quantities. If the estimates are low, you'll win on paper but run short on hours to cover your fixed costs. If you have fixed costs (equipment you must keep ready, for example), check that your unit rates cover them even in a light year.
Price the extras the scope hides
- Call-outs and minimums. If the buyer can call you out for 30 minutes of work, does the tender let you charge a minimum? If not, price it in.
- After-hours work. Overtime rates, evenings, weekends and holidays.
- Start-up costs. Mobilization, new equipment, hiring, training. Some tenders let you price them separately; many don't, so spread them over the term.
- Reporting and meetings. Monthly reports, quarterly meetings, inspections with the buyer.
Check your number against reality
- Past awards. Many buyers publish award results or supplier payments, and federal contract history is on CanadaBuys. CrewBid shows who has held similar work where we know it.
- Your own data. Compare cost per square foot, per site or per hour with jobs you've done.
- The buyer's budget. Occasionally stated; more often visible in council or board reports. If your number is far above it, revisit your assumptions before you submit.
If your honest price is higher than past awards, don't automatically cut it. The previous contractor may have been losing money. Bid what works, and use the proposal to show why.
Where to go next
How to read a tender helps you pull the quantities out of the scope. For evaluated RFPs, see how to write an RFP proposal that scores well. For why the cheapest bid doesn't always win, read does the lowest bid always win?
Sources
Rules and forms change. Check the official page before you rely on a detail here.