UK Tender Calculator

• Contract value is the total the buyer will pay you across the whole term, excluding VAT.
• Direct costs are the labour, materials, plant and subcontractors used only on this contract.
• Overhead recovery is the share of your fixed running costs the contract has to absorb, entered as a percentage of value.
• Gross profit is value minus direct costs minus overhead recovery, and margin is that profit divided by the value.

A facilities firm is looking at a three year council contract worth 240,000 in total, with direct delivery costs of 180,000 and a 10% overhead recovery.

• Contract value: 240,000.
• Direct costs: 180,000.
• Overhead at 10% of value: 24,000.
• Profit: 240,000 - 180,000 - 24,000 = 36,000.

A profit of 36,000 across three years, a margin of 15%, or roughly 12,000 a year.

Margin on public work is usually thinner than on private work, and the trade off is length and reliability of payment. A single figure margin can still be worth bidding for if the contract keeps a team busy, but it leaves very little room for a costing error or an unexpected price rise. If the margin looks strong, check that your direct costs include mobilisation, management time and the reporting the buyer expects.

Should I use figures excluding VAT?

Yes. Public buyers evaluate on prices excluding VAT because most can recover it.

What margin is normal on public contracts?

It varies widely by sector. Services with high labour content often run in single figures, while specialist work can be higher. Compare against your own historic jobs rather than a rule of thumb.

Does this include the cost of bidding?

No. Use the bid cost calculator for that, and the tender ROI calculator to weigh the two together.