What Does It Really Cost to Pursue a Federal Contract?
How much would you spend for a chance to lose?
Behind every glossy proposal are hours, salaries, subscriptions, and strategy sessions that never make it into the spotlight. The financial reality of bidding is one of the least discussed and most misunderstood aspects of federal acquisition.
The Spending Starts Before the RFP
By the time a solicitation is released, many competitors are already financially committed. Capture work begins long before any official posting appears. Teams spend months attending industry days, building relationships, and shaping opportunities that may never mature into revenue.
Under FAR 31.205-18, these early efforts fall under Bid and Proposal (B&P) or Independent Research and Development (IR&D) costs, which are allowable if they are reasonable and properly allocated. These costs can be counted as indirect expenses, but only with careful documentation.
Travel, conference fees, and the cost of market intelligence tools like GovWin or HigherGov pile up fast. Add salaries for business developers, capture managers, and executives, and the financial risk begins before the competition even starts. These are not theoretical costs. They are real, recurring, and rarely visible outside the organization.
When the RFP Drops, the Meter Starts Running
Once a solicitation is live, spending accelerates. Proposal teams scramble to interpret requirements, model staffing plans, and produce compliant narratives that can withstand audit-level scrutiny.
Chapter 33 of the DCAA Guidebook classifies these proposal costs as allowable, but only when supported by detailed documentation. Every labor hour, consultant invoice, and review cycle must be traceable.
Meanwhile, the less visible cost builds in the background. When subject matter experts, engineers, or managers shift focus from billable work to proposal writing, productivity drops. Those lost hours never show up in pursuit budgets, but they hit where it matters most--profitability.
The pursuit quickly transforms from an opportunity into an expense that must be justified by a win.
The Math Isn’t Pretty
Industry estimates put proposal development at one to three percent of a contract’s total value. On paper, that sounds manageable. In practice, it can mean burning through hundreds of thousands, or even millions, before a single evaluation begins.
The GAO Cost Estimating and Assessment Guide stresses that accurate cost tracking and documentation are essential for realistic decision-making
When companies underestimate pursuit costs, they erode profit margins long before award. When they overestimate, they price themselves out of contention.
Those dynamics shape who competes and who steps back. Complexity, speed, and unclear expectations all carry financial weight. Every page of requirements, every data call, and every re-release adds to the cost of competition.
The Real Cost of Skipping the Homework
In a recent episode of Unsolicited, Capture and Proposal Strategist Nichole Reber described what happens when technical professionals step into capture or proposal roles without understanding the business side of the process. She has seen engineers and IT specialists take on management positions where motion becomes the metric for success, chasing every opportunity that appears in a CRM because it feels like progress.
That approach might look busy, but it’s a slow financial drain. Nichole explained that when teams skip early capture work, they waste time, energy, and resources on pursuits they were never positioned to win. Over time, that pattern can cost people their jobs and push companies toward collapse.
“The cost is literally losing your job,” she said.
Her point reframes proposal culture as a leadership problem, not a procedural one. Firms that fail to treat bidding as a strategic investment often spend themselves into exhaustion. Skipping the homework doesn’t save time, it multiplies the cost of failure.
When Awareness Shapes Outcomes
Pursuit costs are not just a business development concern. They influence the health of the entire acquisition ecosystem. Every solicitation design, response timeline, and evaluation format affects how much money is burned before a contract is even awarded.
Understanding those economics leads to stronger competition and more sustainable performance. For some, it means rethinking what “readiness” really looks like. For others, it means recognizing when to walk away before the cost of staying in the game becomes the reason they can’t play next time.
So before the next internal rallying cry to “go after it,” pause for a different kind of calculation: What will it actually cost to compete… and is it worth it?