There's a story our instructors tell in every workshop, and it reframes how attendees think about pricing forever. It starts in a warehouse, with the most popular ball bearing in the world.
The 23 prices of a 6203
The 6203 ball bearing — half-inch bore, inch-and-a-quarter outside diameter — is inside your car's alternator, your water pump, your furnace blower, your wheelbarrow. One of our instructors worked at a distribution center that sold them by the millions. Sitting on the sales desk one day, he discovered the same bearing had 23 different prices:
- $7.50 — blister-pack retail at the hardware store
- $4.00 to $4.85 — hardware store wholesale, depending on location count
- $3.75 — distributor pricing, down to $3.25 with multi-location discounts
- $2.75 — electric motor rebuilders
- $2.55 — alternator rebuilders
- $2.45 — water pump rebuilders
- 63 cents — OEM buyers like Chrysler, in 15,000-unit shaker boxes
The bearing cost 17 cents to make. Every price on that ladder was "right" — because every price was set by a market, not by the cost of the product.
What this teaches about government work
Beginners price government work like a hardware store customer — cost plus a timid margin — because nobody ever told them the ladder exists. But federal contracts have the same ladder:
- The same job, in different markets, is worth different amounts. A $157,000 specialty job can carry a $225,000 second bid — the winning contractor left money on the table simply because the next-lowest competitor was pricing their fear of the agency, not the work.
- Remote, difficult, or unglamorous work pays more. When you're the only bidder on a job in a place nobody wants to go, the market sets the price high — if you have the nerve to bid it (see the Skagway story).
- You get to decide which market you're in. The government estimates aren't ceilings. Contractors who know a specialty — bulletproof glass, a dam interior, HVAC in a museum — price as specialists, and specialists set their own rung.
As the instructor puts it: what's the right price? Every price is driven by the market — you get to decide what market you're in. The problem is nobody ever gave you permission, or told you how this works.
The two pricing systems
Federal solicitations are evaluated two ways. LPTA (lowest price technically acceptable) means price dominates — your strategy is cost discipline plus meeting every requirement exactly. Best value means past performance and technical approach can beat a lower price. Read the evaluation criteria before you price; it changes everything. And construction work over $2,000 falls under Davis-Bacon prevailing wages, which you must price into labor.
Where the real money is made
Not in the bid — after the award, when you buy out the job. The contractors with 30% margins don't bid better; they buy better, then deliver.