How Much Do Tenders Pay? A South African Pricing And Profitability Guide

If you’ve ever asked “how much do tenders pay?” you’ve already discovered the messy truth: there isn’t a single number. What you actually get paid depends on contract type, sector, pricing schedules, and how well you build your rates and margins. In South Africa, two suppliers can win the same value tender and walk away with very different profits, because one understood the fine print and the other priced on vibes.

This guide unpacks pay, profit, and price for the South African tender market. You’ll learn how to read the BOQ, set realistic margins per sector, manage cash flow and risk, and run numbers on worked examples. Whether you’re new or scaling up, use this as a practical playbook to price smarter, and keep the profit you earn.

What “Pay” Means In Tenders: Contract Value, Rates, And Profit

When you ask how much do tenders pay, you’re usually mixing up three ideas that behave very differently: what the buyer spends overall, what you invoice per unit/hour, and what’s left as profit after costs.

Total Contract Value Vs Unit Rates

Total contract value (TCV) is the headline number, R2 million for a year of cleaning, or R18 million for a road rehab project. It’s not what you take home.
Unit rates are what you actually quote for each item or hour: R28 per meal, R185 per hour for a guard, R1,250 per ton of asphalt. Your monthly invoices come from units × quantities.
Many tenders award on rates and estimated quantities. If actual quantities drop, your revenue drops too. Always stress-test your cash flow against realistic volumes.

Revenue Vs Profit Margin

Revenue is what you invoice. Profit is what’s left after direct costs (materials, labor, plant, subs) and overheads. Margin is expressed as a percentage of revenue.
Example: You invoice R1,000,000. Direct costs are R750,000. Overheads allocated are R100,000. Profit = R150,000 (15%).
The public sector often squeezes price. Sustainable suppliers separate revenue ambitions from margin discipline, don’t chase turnover at 0–3% margins unless it’s a strategic foot in the door.

Fixed Price Vs Schedule Of Rates Vs Time-And-Materials

Fixed price: You carry quantity and productivity risk, but you can protect profit with strong planning and contingencies.
Schedule of rates (SOR): Buyer orders as needed. Your pay flexes with quantities. Good for recurring services and maintenance.
Time-and-materials (T&M): Paid for actual hours and materials, often with a markup. Transparent, but you must track timesheets, GRNs, and approvals to the letter to avoid disputes.

Typical Tender Values In South Africa By Buyer And Sector

Values vary widely by buyer and industry. Here’s a realistic, on-the-ground range to anchor your expectations.

National And Provincial Departments

Routine goods and services: R200,000 to R5 million per award, often via RFQs or limited bids.
IT, consulting, and health: single awards anywhere from R1 million to R50+ million, especially for multi-year frameworks.
Trends: More use of panels and transversal contracts via National Treasury to consolidate spend and standardize rates.

Municipalities And State-Owned Enterprises

Municipalities: frequent RFQs under R1 million for supplies and maintenance: capital works can run from R5 million to R200+ million, depending on city size.
SOEs (like Transnet, Eskom, PRASA, SANRAL): multi-year, high-value contracts, logistics, construction, ICT, ranging from R10 million to billions for mega-projects. Expect demanding compliance and performance guarantees.

Common Sectors: Construction, Cleaning, Security, ICT, Catering, Transport

Construction: small works R1–R10 million: medium R10–R100 million: major civil works can exceed R500 million.
Cleaning: R500,000–R10 million per year depending on square meterage, service hours, and consumables.
Security: R1–R30 million per year: guard numbers, 24/7 shifts, and armed response drive value.
ICT: from R250,000 for hardware lots to R100+ million for software, networks, and managed services.
Catering: R100,000–R5 million: event-based or daily institutional feeding models.
Transport: R200,000–R20 million: school transport, medical courier, last-mile delivery.

Frameworks, Panels, And Purchase Orders

Framework or panel: you’re pre-approved with set rates. Actual pay lands via purchase orders (POs) issued against that panel. Your revenue depends on how much work is allocated.
Tip: Ask for historical volumes, service level breaches, and the allocation method (rotation, performance, or price-first) before you price. Your pay lives and dies by the call-off reality, not the headline panel award.

How To Read The Pricing Schedule And BOQ

The Bill of Quantities (BOQ) or pricing schedule is where revenue becomes real. Read it like a hawk.

Unit Descriptions, Quantities, And Provisional Sums

Unit descriptions: Confirm units (each, m², m³, ton, hour). Misreading units is a classic margin killer.
Quantities: Look for “est.” (estimated) or “provisional.” If provisional, the buyer can change quantities, your final pay moves with actuals.
Provisional sums: Allowances for undefined work. They’re usually remeasured and may require quotes later. Don’t assume they’re guaranteed revenue.

Allowances: Attendance, Preliminaries, And Contingencies

Attendance and prelims: Site establishment, supervision, HSE, security, transport, small tools, admin. These are real costs, price them, don’t bury them.
Contingency: Often included by the buyer as a line item. If not, include your own risk contingency in your markup.
Attendance on specialists: If you must assist a nominated sub (e.g., scaffolding, permits), price that time and plant explicitly.

Escalation, Indexation, And Price Adjustment Formulas

Some contracts fix prices: others allow escalation based on CPI, PPI, fuel indices, or a formula referenced in the conditions (e.g., NEC/X, GCC, or bespoke clauses).
Check the base date, review cycle, and eligible components (labor, fuel, materials) before you accept multi-year pricing.
Practical step: Model 6–10% annual inflation on labor and 8–15% for volatile materials unless the contract explicitly covers escalation. South African inputs have been inflationary in recent years, with fuel and steel particularly spiky.

Building Your Price: Cost Breakdown And Markups

Good tender pricing is a disciplined build-up from costs to a defendable selling price. Here’s a simple structure you can reuse.

Direct Costs: Materials, Labor, Plant, And Subcontractors

Materials: Use supplier quotes valid for the tender period: ask for volume breaks and delivery terms to the actual site.
Labor: Base rates, plus leave, overtime, PPE, training, and statutory costs (UIF, COID). For security/cleaning, follow sectoral determinations and bargaining council agreements.
Plant and equipment: Own vs hire. Include fuel, operator, maintenance, and idle-time buffers.
Subcontractors: Fix scope in writing. Get back-to-back terms on quality, delivery, and penalties aligned to your main contract.

Overheads And Recovery Methods

Site overheads: supervision, site offices, data, security, HSE, quality control, utilities.
Head office overheads: accounting, payroll, HR, tendering, insurance, rental, software.
Recovery methods: percentage on direct costs, per-unit loadings, or a prelims/attendance line. Be consistent so you can compare jobs.

Markup, Margin, And Break-Even

Markup is applied on cost: margin is the profit percentage of selling price. They’re not the same.
Example: Costs R850,000. If you want 15% margin, your price is 850,000 / (1 – 0.15) = R1,000,000. A 15% markup would only price at R977,500 (margin 13%).
Break-even: Know the minimum price that covers direct costs and allocated overheads. Anything below that is strategic only, and time-boxed.

Risk Contingency And Inflation

Risk register: list 5–10 risks (late permits, fuel spikes, rework, weather delays), assign probability and cost impact, and price a contingency proportionate to exposure (often 3–10% depending on complexity).
Inflation: For multi-year service contracts, include escalations or cap exposure with supplier agreements referencing CPI or sector indices.
Don’t double-count: If the buyer provides a contingency line, don’t load the same risk again unless you’re covering different exposures (e.g., supplier failure not covered by the buyer’s contingency).

Profitability Benchmarks And Realistic Margins

Margins vary by sector and risk. If you’ve wondered how much do tenders pay after costs, these ranges will keep you honest.

Low-Margin Commodities And Stationery

Typical net margins: 3–8% if you manage logistics well: 1–3% if you chase price-only awards with slow payers.
Where profit hides: negotiated rebates, bulk buy discounts, and efficient last-mile delivery. Miss one, and the margin evaporates.

Medium-Margin Services: Cleaning, Catering, Security

Typical net margins: 8–15% with good supervision and absenteeism control.
Cost landmines: non-billable overtime, relief staff, consumables overuse, and wage increases not mirrored in escalation clauses.
Winning moves: tech-enabled time-and-attendance, strict stock control, and SLAs with measurable outputs.

Higher-Risk, Higher-Margin Projects: Construction And ICT

Typical net margins: 10–20% for well-managed projects: 5–10% on competitive civils: >20% possible on niche ICT or specialized works with strong IP.
Risk drivers: design changes, remeasure items, utilities relocations, integration complexity, and supply chain shocks.
Countermeasures: robust change control, early warning notices, milestone-based billing, and supplier hedges for critical materials.

When To Walk Away

If your modeled net margin is under 5% and cash conversion is longer than 60–90 days, the working capital strain can sink you.
Walk away when the scope is vague, penalties are uncapped, or the buyer refuses reasonable escalation over multi-year terms.
Your future self will thank you for the tenders you didn’t win at a loss.

Cash Flow, Payment Terms, And Getting Paid

Revenue is theory until cash hits your account. South African public buyers are required to pay valid invoices within 30 days, but delays happen. Price with cash flow in mind.

Payment Cycles In The Public Sector

Standard term: 30 days from receipt of a valid invoice and proof of delivery/GRN. Some SOEs operate on 45 days.
Practical reality: Month-end batching and approval layers can push first payments to 45–60 days. Plan working capital for at least two cycles.
Tip: Clarify acceptance points, who signs off, what documents are needed, and the cut-off dates.

Retention, Penalties, And Performance Guarantees

Retention: Common in construction, 5–10% retained and released at practical completion and at the end of the defects period.
Performance guarantees: Often 5–10% of contract price via bank or insurer. Cost this (typically 1–3% per annum of the guaranteed amount) into prelims.
Penalties/LDs: Commonly a daily percentage capped (e.g., up to 10% of contract value). Missed milestones can erode months of profit, protect your program and document delays.

Invoicing, GRNs, And Proof Of Delivery

No GRN, no pay. Track GRNs for every delivery or service period. For services, signed timesheets or service reports act as GRN substitutes.
Submit clean invoices: correct PO number, VAT details, banking confirmation, delivery dockets, and any permits or test certificates.
Keep a payment log: submission date, approver, follow-ups. Escalate early and professionally.

Funding Options: Purchase Order Finance And Cessions

Purchase order (PO) finance: A financier pays your suppliers based on a valid PO, then you repay from the invoice proceeds. Useful for supply tenders.
Invoice discounting/factoring: You sell invoices for immediate cash (less a fee). Works well with predictable payers.
Cessions: Some buyers allow a cession of payment to your funder: confirm upfront. Government entities typically have defined processes.
Also explore SMME programs from banks, sefa, and some SOEs aimed at supplier development and early payment.

Taxes, Compliance, And Price Sensitivities

Price is never just numbers, compliance levers can shift your pay and win probability.

VAT, Withholding, And Statutory Contributions

VAT: If you’re VAT-registered, quote prices “excluding VAT” and show VAT separately. If you’re not, check whether the buyer requires VAT registration for the contract size.
Withholding: Some entities may withhold tax where compliance is unclear, keep your tax clearance and CSD active.
Statutory: Budget for UIF, COID, bargaining council levies, and sectoral minimums (especially in security and cleaning).

B-BBEE And Local Content Effects On Price

B-BBEE scorecards impact points: strong levels can offset a slightly higher price in 80/20 or 90/10 evaluations.
Local content: Certain items (steel, textiles, buses, valves, PPE, etc.) have designated minimum local content thresholds. Non-compliance can disqualify you, confirm suppliers and documentary proof early.

Subcontracting Requirements And Profit Split

Some bids require subcontracting a percentage to SMMEs or designated groups. Plan the scope split and pricing model so you don’t give away margin accidentally.
Formalize back-to-back terms with subs: rates, quality, timelines, and penalties aligned to the main contract.

Preferential Point Systems And Price Weightings

Most public tenders use PPPFA point systems, commonly 80/20 (for lower-value bids) and 90/10 (higher-value). Price often carries 80–90% of technical+price points, with preference points added.
Strategy: If price weighting is heavy and technical is pass/fail, you’re in a price war, optimize costs and reduce risk. If technical carries meaningful weight, invest in method statements, CVs, and methodology to justify stronger rates.

Worked Examples: Estimating Pay And Profit

Let’s run three simplified scenarios so you can benchmark how much tenders pay, and what you actually keep.

Small Supply Purchase Order (Under R500,000)

Scenario: You supply 1,000 office chair units at R2,900 each to a provincial department. Total nominal value: R2,900,000. But your award is limited to an initial 150 chairs (R435,000) with potential top-ups.

Direct costs per unit: chair purchase R2,450: delivery and packaging R60: handling/admin R15. Total direct per unit: R2,525.
Overheads recovered: R75 per unit (ops, sales, finance, warranty risk).
Cost per unit: R2,600. Selling price: R2,900. Unit gross margin: R300 (10.3%).
If the buyer only orders 150 chairs: Revenue R435,000: gross profit ~R45,000: overheads already recovered in the R75/unit. Net margin after incidental costs might sit around 7–9% if deliveries are tight and payments land within 30–45 days.
Sensitivity: A 2% price drop or a R50 fuel spike can halve your profit. Lock supplier quotes and consider PO finance to secure volume discounts.

Annual Service Contract (R1–R5 Million)

Scenario: Two-building cleaning contract for 12 months: evaluated on schedule of rates.

Staffing: 12 cleaners at R6,200 cost-to-company per month (incl. benefits, PPE, leave), 1 supervisor at R9,500. Monthly labor: R83,900.
Consumables and equipment: R14,000/month (chemicals, bags, mops, machine amortization, maintenance).
Site overheads: R10,000/month (transport, data, compliance, training days).
Head office allocation: 8% of revenue.
Target margin: 12% net.

Build-up:

Monthly direct costs ≈ R83,900 + R14,000 + R10,000 = R107,900.
Assume selling price monthly = X. Head office at 8% of X: target profit at 12% of X.
Equation: Direct costs (R107,900) + Overheads (0.08X) + Profit (0.12X) = X → R107,900 = 0.80X → X ≈ R134,875.
Annual revenue ≈ R1,618,500. Annual profit target (12%) ≈ R194,220.
Risks: absenteeism (relief staff), wage increases mid-year, scope creep (windows, deep cleans). Lock escalation (CPI or wage-linked) and define out-of-scope tasks with billable rates.

Construction Project (R10–R50 Million)

Scenario: R22 million road resurfacing using a remeasure contract (GCC/NEC style), 9 months.

Direct costs: asphalt supply and lay R13.2m: traffic management R1.1m: plant and fuel R2.8m: subcontracted road marking R650k. Total direct ≈ R17.75m.
Site prelims and attendance: R1.45m (site establishment, supervision, HSE, QA, security, insurances, testing).
Head office overhead recovery: 4% of revenue (competitive civils).
Target net margin: 10%.

Build-up:

Let price = X. Directs (R17.75m) + prelims (R1.45m) + OH (0.04X) + profit (0.10X) = X → R19.20m = 0.86X → X ≈ R22.33m.
Awarded value at R22m means you’ll need to trim prelims or improve buy-outs to hold 10% target. Alternatively, accept a 9% net margin at R22m if risks are contained.
Cash flow: Expect 10% retention (5% at PC, 5% end of defects). Performance guarantee at 7.5% costs ~1.5–2.0% p.a. of the guaranteed amount, budget it. Carry out rigorous change control to protect against scope creep and keep LDs off your back.

Takeaway: In all three, what tenders pay is less important than how cleanly you convert scope to units, units to revenue, and revenue to cash, without bleeding margin to risk and admin.

Conclusion

So, how much do tenders pay? Enough to grow a serious business, if you price with discipline, understand the BOQ, and protect your margin with solid contracts and cash-flow planning. In South Africa, smart suppliers win by balancing competitive rates with realistic overhead recovery, enforceable escalation, and tight delivery.

Ready to find opportunities that match your capacity and pricing sweet spot? Visit eTender SA to browse verified tenders, set alerts, and move faster from quote to cash.

Frequently Asked Questions

What does “how much do tenders pay” actually mean in South Africa?

Asking how much do tenders pay mixes three things: total contract value (the headline), unit rates you invoice against, and profit after costs and overheads. Many awards are rate-based with estimated quantities, so actual volumes drive revenue. Your take-home depends on pricing discipline, risk, escalation, and cash-flow control.

How much do tenders pay by sector in South Africa?

Typical ranges vary: cleaning R500,000–R10 million/year, security R1–R30 million/year, construction from R1–R500+ million, ICT R250,000 to R100+ million, catering R100,000–R5 million, transport R200,000–R20 million. Remember, how much do tenders pay in profit depends on margins, escalation, quantities, and performance against SLAs and penalties.

How do I set a profitable margin without overpricing my tender?

Build up from verified direct costs, add site and head-office overhead recovery, then apply target margin correctly (margin vs markup are different). Benchmark: 3–8% net for commodities, 8–15% for services like cleaning/security, 10–20% for well-run projects. Stress-test risks, inflation, and break-even before finalizing rates.

When do tenders actually pay, and what delays payment?

Public buyers typically pay within 30 days of a valid invoice and GRN, but first payments can land after 45–60 days due to approvals and batching. Construction may include 5–10% retention. Missing PO numbers, documents, or sign-offs, and SLA disputes are common causes of delays—track GRNs and escalate early.

Can I get an advance or use finance if cash is tight on a tender?

Advance or mobilization payments may be allowed in some contracts (often against an advance payment guarantee), but aren’t standard for routine goods/services. Many suppliers use purchase order finance, invoice discounting, or cessions where permitted. Compare fees to margin, and align funding timelines with approval and payment cycles.

What’s the best way to price a BOQ or schedule-of-rates tender accurately?

Use a structured cost model: verify units and quantities, separate direct costs, prelims, overheads, and contingency, and model escalation. Spreadsheets with rate libraries, supplier quote trackers, and risk registers work well. For projects, add remeasure scenarios. Time-and-attendance or stock-control tools help protect margins during delivery.