Skip to main content

Methodology

Bid / No-bid Economics Planner methodology

Compare contract contribution, bid preparation cost, capacity opportunity cost and a user-entered win probability before deciding whether a bid clears its economic threshold.

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Contribution if won
contributionIfWonExTax = contract price โˆ’ delivery cost โˆ’ capacity opportunity cost

Where

contractPriceExTax
Contract price (currency units/won bid, ex tax)Source: Business record
deliveryCostExTax
Delivery cost (currency units/won bid, ex tax)Source: Business record
capacityOpportunityCostExTax
Capacity opportunity cost (currency units/bid opportunity, ex tax)Source: Business record
contributionIfWonExTax
Contribution if won (currency units, ex tax)Source: Calculated output
Expected bid value
expectedBidValueExTax = win probability ร— contribution if won โˆ’ bid preparation cost

Where

bidPreparationCostExTax
Bid preparation cost (currency units/bid submission, ex tax)Source: Business record
winProbability
Win probability (decimal probability of the submitted bid winning)Source: User assumption
contributionIfWonExTax
Contribution if won (currency units, ex tax)Source: Calculated output
expectedBidValueExTax
Expected bid value (currency units, ex tax)Source: Calculated output
Break-even win probability
breakEvenWinProbability = bid preparation cost รท contribution if won when contribution is positive

Where

bidPreparationCostExTax
Bid preparation cost (currency units/bid submission, ex tax)Source: Business record
winProbability
Win probability (decimal probability of the submitted bid winning)Source: User assumption
contributionIfWonExTax
Contribution if won (currency units, ex tax)Source: Calculated output
breakEvenWinProbability
Break-even win probability (decimal rate)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

The rows below come directly from the exact engine using the visible default fixture.

Contract price
20,000 currency units/won bid, ex tax
Delivery cost
12,000 currency units/won bid, ex tax
Bid preparation cost
1,000 currency units/bid submission, ex tax
Capacity opportunity cost
2,000 currency units/bid opportunity, ex tax
Win probability
0.25 decimal probability of the submitted bid winning

Calculation and outputs

  1. Contribution if won

    contributionIfWonExTax = contract price โˆ’ delivery cost โˆ’ capacity opportunity cost
    Contract price
    20,000 currency units/won bid, ex tax
    Delivery cost
    12,000 currency units/won bid, ex tax
    Bid preparation cost
    1,000 currency units/bid submission, ex tax
    Capacity opportunity cost
    2,000 currency units/bid opportunity, ex tax

    Engine result: 6,000 currency units, ex tax

  2. Expected bid value

    expectedBidValueExTax = win probability ร— contribution if won โˆ’ bid preparation cost
    Delivery cost
    12,000 currency units/won bid, ex tax
    Bid preparation cost
    1,000 currency units/bid submission, ex tax
    Capacity opportunity cost
    2,000 currency units/bid opportunity, ex tax
    Win probability
    0.25 decimal probability of the submitted bid winning
    Contribution if won
    6,000 currency units, ex tax
    Break-even win probability
    0.166667 decimal rate

    Engine result: 500 currency units, ex tax

  3. Break-even win probability

    breakEvenWinProbability = bid preparation cost รท contribution if won when contribution is positive
    Delivery cost
    12,000 currency units/won bid, ex tax
    Bid preparation cost
    1,000 currency units/bid submission, ex tax
    Capacity opportunity cost
    2,000 currency units/bid opportunity, ex tax
    Contribution if won
    6,000 currency units, ex tax
    Expected bid value
    500 currency units, ex tax

    Engine result: 0.166667 decimal rate

Example

The rows below come directly from the exact engine using the visible default fixture.

Contribution if won
6,000.00
Expected bid value
500.00
Break-even win probability
16.7%
Clears economic threshold
Yes

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

Expected value combines probability and economics but does not predict whether the bid will be won.

3. Validation and boundary checks

  • All values must be finite and remain inside the visible input boundaries.
  • All money values use one consistent ex-tax basis and period.
  • Rates must remain inside their engine-owned boundaries.
  • Break-even win probability is unavailable when contribution if won is not positive.
  • The economic threshold clears only when raw expected bid value is zero or positive.
Contract price minimum
contractPriceExTax โ‰ฅ 0 currency units/won bid, ex tax โ€” A lower value is rejected before calculation.
Contract price maximum
contractPriceExTax โ‰ค 10,000,000 currency units/won bid, ex tax โ€” A higher value is rejected before calculation.
Delivery cost minimum
deliveryCostExTax โ‰ฅ 0 currency units/won bid, ex tax โ€” A lower value is rejected before calculation.
Delivery cost maximum
deliveryCostExTax โ‰ค 10,000,000 currency units/won bid, ex tax โ€” A higher value is rejected before calculation.
Bid preparation cost minimum
bidPreparationCostExTax โ‰ฅ 0 currency units/bid submission, ex tax โ€” A lower value is rejected before calculation.
Bid preparation cost maximum
bidPreparationCostExTax โ‰ค 10,000,000 currency units/bid submission, ex tax โ€” A higher value is rejected before calculation.
Capacity opportunity cost minimum
capacityOpportunityCostExTax โ‰ฅ 0 currency units/bid opportunity, ex tax โ€” A lower value is rejected before calculation.
Capacity opportunity cost maximum
capacityOpportunityCostExTax โ‰ค 10,000,000 currency units/bid opportunity, ex tax โ€” A higher value is rejected before calculation.
Win probability minimum
winProbability โ‰ฅ 0 decimal probability of the submitted bid winning โ€” A lower value is rejected before calculation.
Win probability maximum
winProbability โ‰ค 1 decimal probability of the submitted bid winning โ€” A higher value is rejected before calculation.

4. Assumptions and source classification

  • All hours, utilisation, costs, rates and recovery targets are supplied by the user.
  • Money values use one consistent ex-tax basis.
  • No provider fee, jurisdiction, benchmark or demand forecast is embedded.
  • Raw engine precision is retained until display.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • Results depend on the completeness and classification of the entered business records.
  • The planner does not forecast demand, utilisation, supplier terms or project outcomes.
  • This is educational business decision support rather than accounting, tax, legal or financial advice.
  • Win probability and capacity opportunity cost are user scenarios rather than market forecasts.
  • The result does not assess tender terms, legal obligations, strategic value or delivery risk outside the entered costs.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the Bid / No-bid Economics planner and methodology.

Guides to interpret the decision and its assumptions.

Return to the planner