Price and manage delivery risks — Goods, furniture & equipment

By the end of this lesson, you will be able to calculate a price, test its return and address a delivery risk.

Common to all countries

Build the cost before choosing the price

Start with quantities, paid time, third-party costs and delivery assumptions. Include mobilisation, supervision, compliance, warranty or support, overhead and the end of the contract where relevant. Separate fixed costs from costs that vary with usage. Forecast volumes are not minimum orders unless the contract makes that commitment.

In this exercise, target margin means profit divided by selling price. A 20% margin therefore requires price = cost ÷ 0.80. Adding 20% to cost is a markup and produces a lower margin. Taxes, discounting and financing are excluded from these teaching sums; add the applicable items to a real bid. Test one credible adverse scenario and decide who controls its cause and how the contract allocates it.

Worked example — Supply and install furniture at five offices

This is a fictional teaching case. Quantities, prices and contractual conditions below are assumptions for the exercise, not legal requirements or market benchmarks.

A component becomes unavailable before production. Verify whether a proposed substitute meets requirements and obtain the required approval; a supplier cannot silently replace an approved sample with a cheaper model.

Item	Cost (currency units)
100 workstations	30,000
Delivery and assembly	6,000
Warranty and administration	4,000
Total	40,000

Total cost is 40,000. To retain 20% of the selling price as profit, price is 40,000 ÷ 0.80 = 50,000. If “Approved component substitution” adds 4,000 to cost without a price increase, profit becomes 6,000, or 12% of price. Preserving 20% would require 55,000, only where the procurement permits that price. A cost increase does not automatically entitle the supplier to a contract price increase.

Country specific — what to verify

Check product safety, applicable standards, labelling, import duties and environmental obligations for the destination. Confirm whether the tender permits equivalents and what proof is accepted. Tax, warranty and public invoicing rules require separate verification.

Customs, taxes, warranties and liability. Use the destination-country module and the actual tender pack. The sources below are references with their own scope; they do not form a single worldwide regime. For the general method, revisit the foundations.

Put it into practice

Calculate the price for 20% of selling price as profit, then add 4,000 to cost. Calculate profit at the unchanged price and write one risk-control action.

Model answer

Total cost is 40,000. To retain 20% of the selling price as profit, price is 40,000 ÷ 0.80 = 50,000. If “Approved component substitution” adds 4,000 to cost without a price increase, profit becomes 6,000, or 12% of price. Preserving 20% would require 55,000, only where the procurement permits that price. A cost increase does not automatically entitle the supplier to a contract price increase. A component becomes unavailable before production. Verify whether a proposed substitute meets requirements and obtain the required approval; a supplier cannot silently replace an approved sample with a cheaper model.

Keep this worksheet in your working file. The quiz below checks the lesson’s decisions; passing it is neither a professional qualification nor a guarantee of an award.