Free tool
Federal Contract Expected Value Calculator
See what a federal contract is actually worth after PWin and proposal cost. No signup required.
This contract has strong expected value at your stated PWin.
Want the realistic PWin for your specific RFP?
RFP Recon analyzes wired-RFP signals, capability fit, and incumbent vulnerability to produce a defensible PWin estimate — not a guess.
Start your first analysis for $75How expected value is calculated
Expected value is gross profit times your probability of winning, minus the cost of writing the proposal. Gross profit is the contract value multiplied by your margin. Proposal cost is estimated from the contract value using a tiered rule of thumb: roughly 2% on small contracts, 1% mid-size, and 0.5% on contracts above $50M.
Proposal-cost tiers matter because a $50K proposal effort against a $500K contract is a very different bet than a $250K effort against a $50M contract. Treating proposal cost as a flat percentage hides the leverage at the high end.
An honest PWin is the part most contractors get wrong. The federal average hovers near 30% on competitive recompetes; a 60–80% PWin should be reserved for situations where the RFP is functionally wired or you are the entrenched incumbent on a non-vulnerable contract.
Why this matters
Bid/no-bid decisions get made on gut feel and pipeline pressure. The result is a year of chasing opportunities with negative expected value — winning just often enough to feel busy, losing often enough to bleed proposal dollars.
Two mistakes dominate. The first is anchoring on contract value and ignoring proposal cost: a $5M contract at 25% PWin sounds great until you subtract a $50K proposal effort and notice the math is barely positive. The second is overestimating PWin out of optimism: a 40% guess instead of an honest 20% turns a clear walk-away into a deceptive coin flip.
This calculator forces both numbers onto the table.
Worked example
Take a real-shape opportunity: a VA Medical Coding recompete worth $1,129,830, restricted to SDVOSB set-asides. You're deciding whether to bid.
PWin— your probability of winning the contract, expressed as a percentage — comes in at 9%. Three other SDVOSBs are credible bidders, the incumbent has held this contract for two consecutive cycles, and your AHIMA-credentialed coder bench is thin. Federal average PWin on competitive recompetes hovers near 30%; 9% reflects that you're meaningfully behind the field.
Proposal cost is $23K — the fully-loaded cost of writing the proposal, including BD labor, capture work, color team reviews, pricing volume, and graphics. For a mid-sized federal services bid the typical range is $15K–$50K, depending on complexity and how much is reusable from prior submissions.
Gross marginis 10% — your expected profit on the contract after direct costs but before G&A. For federal services work, 8–15% is the realistic range; 10% sits conservatively in the middle.
Plug it in. Weighted gross value is contract × PWin × margin: $1,129,830 × 9% × 10% = $10,168. Subtract the proposal cost and expected value is −$12,832. That's the dollars you should expect to lose on average by pursuing this bid, weighted by your odds. The formula — contract value × PWin × gross margin − proposal cost — is the entire bid/no-bid argument in four numbers.
Breakeven PWin — the win probability at which expected value crosses zero — is 20.4% on this opportunity. At 9%, you'd need to more than double your win probability to justify the bid cost. Walk away — unless a teaming partner credibly lifts PWin into the high teens by closing the credentialed-coder gap.
Frequently asked questions
What is expected value in federal contracting?
Expected value is the dollar amount you should expect to make (or lose) by pursuing a bid, weighted by your probability of winning. The formula is contract value times PWin times gross margin, minus proposal cost. Negative expected value means the bid loses money on average across many similar pursuits — even if you happen to win this specific one.
How do I estimate PWin for a federal RFP?
Start with the federal average — competitive recompetes hover near 30% — and adjust for the actual deal. Lower PWin when there's a strong incumbent on a non-vulnerable contract, when the set-aside type favors competitors who have done the work before, or when your capability fit is weak on the central PWS requirements. Anchor on evidence, not optimism: most BD teams overestimate PWin by 10–20 percentage points.
What's a reasonable proposal cost to assume?
$15K–$50K is typical for a mid-sized federal services bid. Account for fully loaded BD labor, capture activity, color team reviews, pricing volume, and graphics — not just writing hours. Larger or more technical bids (IDIQ task orders with complex pricing, IT modernization with detailed staffing plans) push higher. Reuse from prior submissions pulls it down.
What gross margin should I use for federal services contracts?
8–15% is the realistic range for federal services work after direct costs but before G&A. T&M and labor-hour vehicles tend lower; FFP work with reusable infrastructure can run higher. Use what your accounting actually shows on completed contracts — not what the proposal claimed you'd hit.
When should I walk away from a bid based on expected value?
Walk away when expected value is meaningfully negative AND a credible teaming or capture move can't lift PWin enough to flip the math. A small negative EV with a defensible path to higher PWin (a teaming partner who closes a real gap, or a wired indicator you can't see yet) might be worth pursuing. A large negative EV with no PWin lever — walk.
How is this different from just looking at contract value?
Contract value answers "what's the prize." Expected value answers "what's the prize weighted by my odds, minus what it costs me to compete." A $5M contract at 10% PWin and 8% margin produces $40K gross weighted value — minus a $30K proposal cost, expected value is $10K. A $2M contract at 25% PWin and 10% margin produces $50K gross — minus the same $30K, expected value is $20K. The smaller contract is twice as profitable on average. Sticker price misleads.