average profit margin construction public works contracts

Pricing limits inevitably constrain your profit. Fees can also fluctuate in such a way that you find your actual profit diverting from your original negotiation price. For example, estimated costs may not always align with your total actual costs. This FAR section outlines the different factors that can affect your profit and how they may vary according to different scenarios. When in doubt, refer to this section of the Federal Acquisition Regulation to crystal-ball your potential profit on a proposal. If you offer products to your preferred clients at a lower price or if you offer discounts based on quantity, prepayment, or another scenario, make sure to extend these same markdowns to the government. A better strategy is to treat the government as you would your favorite commercial customer. Profit is a motivator-it incentivizes optimal contract performance and ensures you have the resources you need to deliver effectively.Ĭontrary to popular belief, you’re not required to offer the government a significant discount.

It seems counterintuitive, but it’s actually in the government’s best interest for contractors to receive a fair profit margin.

That all said, here are the basic tenets of crafting a proposal that makes you money and shows the agency you’re working with that you’re an honorable player in the game.

There is a strategy you must craft, a ceiling you must respect, and self-respect you must uphold. What should you reasonably make on a contract? As a small business, you must calculate your profit on a government contract carefully.

Average profit margin construction public works contracts