RFP proposal

An RFP proposal is a price you commit to against a scope the client wrote, before the work exists, so it has to be built from cost upwards rather than guessed from what the other respondents might charge. This tool takes the hours of your own or your team's time at what an hour actually costs you, adds subcontracted work and third-party costs at cost, recovers your overhead as a share of that direct cost, holds a contingency for the parts of the RFP that are vaguer than they look, and then sets the profit you want as a share of the price itself. The result is an RFP proposal where every line has a reason, and a profit figure you can see before you submit.

Cost rate is not billing rate

The cost rate field asks what an hour costs you, not what you charge for it: wages or drawings plus employer costs, divided by the hours you actually bill in a year rather than the hours you are at your desk. Freelancers who price an RFP proposal from their billing rate double count the profit and then wonder why they lost; agencies that price from salary alone forget the empty weeks and win work that loses money.

Overhead has to be recovered somewhere

Rent, software, insurance, the accountant, the hours you spend answering RFPs like this one: none of it is on the job, and all of it has to be paid for by the jobs. Recovering it as a percentage of direct cost is the simplest honest method for a small firm. Work out last year's overhead against last year's direct costs once, put the percentage here and reuse it until the numbers move.

Profit is a percentage of the price, not of cost

Marking cost up by fifteen percent and earning fifteen percent of the price are different numbers, and the second is smaller. The tool divides by the remainder so that the profit line really is the share of the RFP proposal you keep. That is the figure to look at before you submit: if it is thin, you are either responding to an RFP you should let go or you have found scope the client has not asked to pay for.