Most contractors still assume they are losing bids because of pricing.
The 2026 Deltek Clarity Government Contracting Study tells a different story.
38% of government contractors identified pricing defensibility as the number one reason proposals were not selected, ahead of technical deficiencies and uncompetitive pricing.
That finding should change how we think about winning. The best proposal is no longer the one with the lowest price. It is the one with the most trusted price: competitive, well supported, and fully grounded in reality. That shift did not happen overnight. It is the result of fast-moving changes to how government contracts are audited and awarded, and it is reshaping what it takes to win.
Winning still matters, but increasingly, being able to defend how the price was built matters just as much.
The latest Clarity study, drawn from more than 900 contractors, makes this change clear, and impossible to ignore.
Every Proposal Ends with Pricing. Every Audit Starts There.
The environment around pricing has changed. Defense spending continues to grow, creating new opportunities across modernization, cybersecurity, emerging technologies, services, sustainment, and manufacturing. For government contractors, that means more opportunities to compete, but also more competition to win.
Services alone now account for 50–60% of federal contract spending, representing more than $750 billion in annual obligations. That makes pricing discipline more important than ever.
The opportunity is significant but capturing it profitably is getting harder. As costs rise, compliance expands, and procurement rules evolve, pricing has become the point where margin, risk, compliance, and competitiveness converge.
Pricing has always been the last stage of a proposal, built on hours of work from business development, capture, and the proposal team. A single RFP response can take up to 84 hours to prepare.
What has changed is the role pricing now plays. The question is no longer whether the proposal is compelling. It is whether every labor category, indirect rate, assumption, and estimate can stand up to scrutiny.
Pricing is not a box to check anymore. It is the determining factor in every bid, and one that cannot afford a rough estimate. Accurate cost estimation, competitive pricing strategy, and market uncertainty rank as the industry's top three challenges but the cost of getting it right continues to climb.
96% of contractors expect compliance costs to hold steady or rise
Bid and proposal costs jumped from 14% to 19% this year alone
Pricing teams are being asked to make sharper decisions with higher stakes and less room for error. Every estimate now carries greater financial, contractual, and compliance risk than it did just a few years ago.
Three Rule Changes Raised the Stakes
Three major shifts fundamentally changed the game for pricing and estimating in 2026.
Together, they shifted more pricing risk from the government to the contractor and raised the cost of getting an estimate wrong.
FAR 2.0, one of the most significant reforms to federal procurement in over 40 years, accelerated the market toward commercial-by-default procurement, requiring new approaches to estimating and a new set of compliance rules.
Fixed-price contracts became far more common, transferring more financial risk to contractors and making pricing accuracy more critical than ever.
DCAA scrutiny around indirect rates intensified, putting cost allocation and rate accuracy under a level of examination that many firms have not experienced in years.
A pricing error used to mean a lost bid. Today, it can also mean a DCAA inquiry or a CPARS consequence that follows a contractor into the next competition.
The Current Operational Reality
The industry has not fully caught up to the new pricing environment.
Contractors are bidding on more opportunities that require certified cost and pricing data than ever before. More than a third survey respondents bid on 11 or more of these contracts last year, with an average of about twelve across all respondents. And more than half of them report win rates between 41% and 70% on those same contracts.
That tells us something important.
Most contractors are not struggling because they are bidding too little. They are struggling because pricing is becoming harder to defend under increasing scrutiny.
That is not a volume problem. It is a pricing defensibility problem.
How Contractors Are Managing Pricing Today
The industry is adapting, but not consistently.
Most organizations still rely on a combination of in-house teams, spreadsheets, disconnected systems, and manual reviews to move pricing from estimate to submission.
56% of contractors still rely on Excel somewhere in the pricing process.
The spreadsheet itself is not the problem. Fragmentation is. That is where version control breaks, assumptions drift, and audit trails disappear.
Some firms have invested in compliance software or formal pricing tools. Others continue to rely on external consultants during DCAA inquiries, TINA reviews, or audit preparation.
The difference is not whether organizations care about compliance.
It is when they address it. The firms seeing the strongest outcomes are building compliance into the pricing process from the beginning. Others are still treating it as a checkpoint before submission.
AI is Accelerating Pricing, and The Risk Along with It
The question is no longer whether contractors will use artificial intelligence (AI). It is whether their pricing processes are ready for it. 92% of contractors plan to use AI, and 45% already use it for estimating and pricing. Done well, AI improves estimate accuracy and speeds up proposal turnaround.
But AI can only work with what it is given. It cannot fill in data that does not exist. If a business lacks governed pricing estimates, AI will not fix that gap. It will amplify it.
That gap is already showing up.
Twenty-seven percent of firms say they cannot validate AI outputs for FAR and TINA compliance, and those costs and estimates are still being submitted.
As adoption accelerates, governance must keep pace. Otherwise, today's efficiency gains will become tomorrow's audit findings.
Where Leaders Pull Ahead on Pricing
72% vs. 48%
Top Performer Win Rate vs. Industry Average
The Confidence Gap Shows Up in Win Rates
Firms pulling ahead are not winning because their price is lower. They are winning because they have built pricing into their operating model. Pricing is connected to the Enterprise Resource Planning (ERP) system, compliance is embedded throughout the process, AI is governed, and every estimate is built with the expectation that it will eventually be reviewed, challenged, and defended.
The data points to four practices that consistently separate Top Performers from the rest of the industry:
- Move from spreadsheet-dependent estimating to governed, system-backed workflows
- Connect the pricing environment to the ERP, since integration - not the tool - is the differentiator
- Treat AI governance as a compliance requirement, not an IT initiative
- Build every estimate as if someone will eventually ask to see the work
Because increasingly, someone will.
Benchmark Your Pricing Strategy
See how your pricing, estimating, compliance, and proposal practices compare to industry peers and Top Performers in the 2026 Deltek Clarity Government Contracting Study.
