Comparing proposals priced in different ways: a cost worksheet

Reference article · 5 min read

When three vendors price the same system three different ways, the proposal that looks cheapest is often the one that disclosed the least. A per-user subscription hides what happens when headcount grows. A fixed-price implementation with hourly change work hides how much change work the project will actually need. A transaction-fee model hides the volume assumption entirely. None of those structures is dishonest on its own, but none of them is comparable to the others until the agency does the work of making it so.

The tool for that work is a cost worksheet the agency builds before proposals arrive, with every driver assumption filled in by the agency rather than by each vendor. Its job is to restate each proposal as one number, over the same period, under the same conditions, and then to show where that number moves when an assumption turns out to be wrong.

Fix the assumptions before the solicitation goes out

If vendors supply the assumptions, they will each supply the ones that flatter their pricing model. Publish the following in the solicitation and require pricing to be built on them:

Evaluated term. Use the full potential life of the contract, base plus all option years, not the base period alone. Renewals are where recurring pricing does its real work.
Sizing. State counts the agency will stand behind: named users, concurrent users, devices, records to convert, annual transaction or case volume.
Growth. State a single growth path for the evaluated years and apply it to every proposal. If growth is genuinely unknown, evaluate at a flat baseline and test the growth cases separately.
Environments. Say whether production, test, training, and disaster recovery are all in scope.
Interfaces. Name the specific systems and the direction of each interface rather than saying "integrations as needed."
Optional modules. Decide which options are inside the evaluated total and which are priced but excluded. Either choice works as long as it is the same for everyone.

Use the same cost rows for every proposal

Give every vendor the same workbook structure and require they map their pricing into it. Useful rows include one-time implementation and configuration, data conversion, interface build, recurring software or subscription, hosting and infrastructure, recurring support and maintenance, training, change work, and end-of-contract data extraction. Add a row for agency labor even though vendors do not price it, because the staffing a project demands is part of the real cost and it differs by approach.

Then translate each pricing model into those rows:

Per-user subscription. Apply the agency's user counts, not the vendor's estimate. Check for tier breakpoints, annual minimums, and whether counts can go down as well as up. Ask when true-ups occur and whether a mid-year addition is billed for the full year.
Fixed price with hourly change work. A fixed price is only fixed against a written scope, so read the scope the price attaches to. Insert a uniform change allowance for every vendor so the comparison does not reward the vendor who assumed the fewest changes, and require a role-by-role rate card held for the term.
Transaction or convenience fee. Apply the agency's volume assumption. Establish who pays the fee, whether any minimum applies if volume falls short, whether refunds and voids are charged, and whether fee revenue offsets other costs. If the public pays the fee, it still belongs on the worksheet as a cost to constituents.

Test whether year one is buying year four

Low first-year pricing is a legitimate strategy and also a common way to move cost past the evaluation window. Three checks surface it:

Look at the curve, not the total. Chart each proposal year by year. A total that matches while the shapes differ is a different risk profile.
Read the final year as the run rate. The last evaluated year of recurring cost approximates what a renewal will cost. Compare those figures directly.
Recompute with the term shortened and lengthened. If a ranking flips when a year is added, the ranking was an artifact of the window.

Also flag introductory credits, waived first-year hosting, discounts that expire, and escalation described as "then-current list price." Escalation should be stated as a fixed percentage or as a capped index-linked adjustment, with the cap in the pricing schedule.

Run a sensitivity pass

Rerun the worksheet with a few disciplined variations: higher and lower growth, one additional interface, one optional module turned on, an extra year of support, and a conversion scope larger than planned. The point is not precision. It is to see whose number moves most. The proposal that is most sensitive to assumptions is the one placing the most risk on the agency, and that belongs in the record alongside the price.

Ask for what makes the worksheet enforceable

Ask vendors to define every unit they price, in writing: what counts as a user, a transaction, an environment, a business day of support. Ask what triggers a price change outside scheduled escalation. Ask what a data export at termination costs and in what format.

Carry the answers into the contract. Hold option-year prices firm, cap escalation, hold optional module prices open for a stated period, fix the rate card, require advance notice before renewal, and state the exit and data extraction terms. Evaluation methods and criteria generally must be disclosed in advance, and the rules vary by state and by entity, so confirm your approach with your procurement office and counsel before publishing.

Keep the worksheet arithmetic separate from qualitative scoring, document every formula, and resolve gaps through written clarifications so the file supports the award if it is questioned.

HQT works with state and local agencies on technology planning and systems evaluation, including cost modeling for software procurements.

Frequently asked questions

How do we compare a subscription proposal to a fixed-price proposal?

Restate both as the same set of cost rows across the same evaluated term, using sizing and growth assumptions the agency publishes rather than assumptions each vendor chooses. One-time costs land in the implementation rows, recurring costs land in the subscription and support rows, and both totals are then summed over the identical number of years. The comparison only holds if the term, user counts, environments, and interfaces are identical for every proposal.

What assumptions should an RFP fix so vendors cannot choose their own?

At minimum: the evaluated term including all option years, user or device counts, annual transaction volume, the growth path applied across years, which environments are in scope, the specific interfaces required, and which optional modules count toward the evaluated total. Publishing these turns pricing into a measurement of the same scope instead of a comparison of differing guesses. It also reduces the number of clarification rounds during evaluation.

How can we tell whether a low first-year price means a higher bill later?

Chart each proposal year by year rather than looking only at the total, and read the final evaluated year of recurring cost as an approximation of the renewal run rate. Then recompute with the term shortened and lengthened to see whether the ranking changes. Introductory credits, waived first-year hosting, expiring discounts, and escalation tied to a vendor's future list price are the usual mechanisms to look for.

How long a period should the cost evaluation cover?

Use the full potential life of the contract, base period plus every option year the agency could exercise, since renewals are where recurring pricing accumulates. Evaluating only the base period systematically favors proposals that shift cost into later years. If your procurement rules constrain the evaluated period, state the constraint in the solicitation and present the longer view as supporting analysis.

Should the cost worksheet be part of the scoring or kept separate?

Keep the arithmetic separate from qualitative scoring so the cost figure is a derived, auditable number rather than a judgment. Document the formulas and assumptions, and resolve missing or ambiguous pricing through written clarifications recorded in the file. Because disclosure and evaluation rules differ by state and entity, confirm the structure with your procurement office and counsel before releasing the solicitation.