How to Price a Care Tender When the Fee Rate Won't Fund the Service

Care tenders are won on quality and price together, yet in most teams the two are costed by different people who never reconcile them: the bid writer promises the service, the finance lead completes the pricing schedule, and nobody checks that the rate funds the promises. In a market where the typical council fee sits well below the true cost of care, that gap is where contracts are lost, or worse, won and then handed back. Learning how to price a care tender starts with tying every method-statement commitment to what the rate can fund, and benchmarking that rate against the published homecare minimum price and the council's own fair cost of care.

At a glance

• The homecare minimum price for England (Homecare Association) is £34.42 per hour for 2026/27, up from £32.14 in 2025/26.
• Councils pay about £25.05 per hour on average in 2026/27, roughly £9 (about 27%) below that floor.
• Only about 1% of public-body homecare contracts pay enough for sustainable delivery, and about 29% pay below even the direct minimum-wage cost of a care worker.
• Staffing is 75% to 90% of homecare cost, so any shortfall lands first on wages, travel pay and training.
• Travel between visits is working time and must count towards the National Minimum Wage, and the HMRC mileage rate rises from 45p to 55p per mile on 6 April 2026.
• Under the Procurement Act 2023 no fixed percentage defines an abnormally low tender, but a costed, benchmarked bid survives it, and commissioners increasingly score financial sustainability.

How to price a care tender when quality and cost sit in different hands

Most losing bids are not written badly; they are costed in two disconnected halves. The bid writer, from the method statement, describes a rich service: small local rounds, generous supervision, a training academy, guaranteed continuity. The finance lead, from a spreadsheet, completes the pricing schedule to land somewhere the organisation can just about live with. The two reach the portal without ever being read against each other.

That is the most expensive habit in care tender pricing, because an evaluator reads them together, as does a commissioner planning delivery. If your quality answers promise monthly face-to-face supervision, dedicated management and small patches, but your rate barely covers contact-time wages and statutory on-costs, one of two things is true: the numbers are wrong, or the promises are. A sharp evaluator marks you down for deliverability; a less sharp one awards you the contract, and you find the mismatch yourself, at your own cost, in year one.

The fix is simple to state and hard to do: every commitment in the quality response must trace to a line in the cost model, and every line must be defensible against a published benchmark. Price and quality then become one argument, not two documents.

What is the minimum price for homecare?

The Homecare Association publishes a minimum price for homecare each year, and it is the most useful single number in domiciliary care tenders. For 2026/27 it is £34.42 per hour in England, effective from April 2026 and built on the National Living Wage of £12.71 for workers aged 21 and over. The 2025/26 figure was £32.14, based on the then National Living Wage of £12.21. These figures are England-specific, and Wales publishes its own minimum price.

The minimum price is not a target margin or an aspiration. It is the floor at which a provider can pay the National Living Wage, fund travel time and mileage, meet on-costs such as holiday pay and training, run a compliant business and keep a small surplus for reinvestment. Below it, something lawful or something sustainable has to give.

The gap between floor and market is stark. The Homecare Association found that only about 1% of homecare contracts with public bodies carried fee rates high enough for legal and sustainable delivery in 2025/26, and that about 29% of public bodies paid below even the direct cost of employing a care worker at the minimum wage, before any overhead, travel or profit.

What is the fair cost of care?

Fair cost of care refers to the exercises councils ran to establish the local cost of delivering care and inform market sustainability planning. In principle a fair cost of care rate reflects real local costs; in practice many sit below independent benchmarks, and fee offers often sit below the council's own stated fair cost.

The numbers show the squeeze. Councils pay an average of about £25.05 per hour for homecare in 2026/27 against the £34.42 minimum price, a shortfall of roughly £9 per hour, or about 27%. That is a structural gap, not one efficiency can absorb, and because staffing is 75% to 90% of the cost of home care, it comes out of pay, travel reimbursement and training first.

For your bid, the fair cost of care matters in two ways. It is a benchmark you can cite to argue your rate is sustainable rather than inflated. And where the council has published its own fair cost of care and market sustainability figures, read them before you price: a rate that undercuts the council's own stated cost is an argument you make against yourself.

The anatomy of a home care hourly rate: where every pound goes

To see why a below-cost rate does so much damage, take a home care hourly rate apart. The Homecare Association's 2025/26 model builds its £32.14 minimum price from the ground up, and although the figures move each year with the National Living Wage, the shape is what matters. For a single hour of care it runs roughly as follows:

• Care-worker pay for contact time at the National Living Wage: about £12.21.
• Travel time between visits, paid at the minimum wage: about £2.75.
• Mileage and travel reimbursement: about £2.02.
• Wage-related on-costs, holiday pay, sick and family pay and training: about £3.18, of which holiday pay alone is about £1.95.
• Employer National Insurance and pension: about £2.54.
• Business and operating costs (office, insurance, care planning, quality, recruitment): about £7.33.
• A small surplus for reinvestment: about £2.10.

Notice how little of that is discretionary: most is wages, statutory employment costs and the fixed cost of running a regulated business. When a council pays £25.05 against a build-up like this, the difference cannot come from the surplus alone, which is a fraction of the gap; it comes out of the largest and most exposed lines, contact-time pay, travel pay and training. That is how an under-funded cost of home care per hour becomes low pay, unpaid travel and a workforce that leaves.

How are domiciliary care tenders evaluated on price?

Care contracts are almost always awarded on the most advantageous tender, a combination of price and quality. Common weightings are 60/40, 70/30 or 80/20, and because care is complex and safety-critical it often attracts a higher quality weighting, though many councils still weight price heavily. Read the weighting first: it tells you what a keener price is actually worth.

Price is usually scored, not merely checked: the most common method gives the lowest compliant price full marks and scores the rest in proportion. To blunt low-balling, some authorities use price bands or a capped range so that shaving pennies stops earning points. In care, ceiling or fixed rates are common, with the council setting a maximum near its fair cost of care and inviting you to compete on quality within it.

Two further mechanics should shape your price. Under the Procurement Act 2023, in force since 24 February 2025, no fixed percentage defines an abnormally low tender, but before rejecting one the authority must notify you and give a reasonable chance to prove it deliverable; a costed, benchmarked bid survives this, a guessed one does not. And block differs from spot: a block contract guarantees volume and lets you plan a workforce at a lower unit price, while spot and framework call-off leaves occupancy, void and travel-inefficiency risk with you, justifying a higher unit rate. Price the risk you actually carry.

The costing mistakes that sink care bids

Beyond the reconciliation failure, a handful of specific errors recur, any one of which can make a strong bid undeliverable.

• Promising what the rate cannot fund: rich supervision ratios, monthly face-to-face supervision, a full training academy, guaranteed continuity, small local patches or dedicated management, when the rate barely covers wages and statutory on-costs.
• Not treating travel as working time. Travel between visits must count towards the National Minimum Wage, and pay averaged across contact time and travel must not fall below it. HMRC can require repayment of arrears, levy penalties and publicly name offenders.
• Mispricing sleep-ins against waking nights. After the Supreme Court's 2021 ruling, a flat sleep-in payment can be lawful for time a worker is asleep and permitted to sleep, but waking-night work attracts the full National Minimum Wage. Conflating the two under-prices the waking night.
• Bidding the year-one wage into a multi-year contract with no indexation. The National Living Wage reached £12.21 in April 2025 and £12.71 in April 2026, so a flat rate across a three-year or five-year term is a loss that compounds.
• Using out-of-date employer National Insurance. From April 2025 it rose from 13.8% to 15% and the threshold fell from £9,100 to £5,000. The Nuffield Trust put the direct cost to independent social care providers at about £940m, within around £2.8bn of total sector cost pressure in 2025/26.
• Forgetting the mileage uplift. The HMRC approved rate rises from 45p to 55p per mile for the first 10,000 miles from 6 April 2026, its first increase since 2011.
• Not reading the pricing schedule rules: whether zero or blank lines are allowed, what is deemed included, and whether price is scored or a pass/fail ceiling.
• Never benchmarking against the Homecare Association minimum price or the council's own fair cost of care.

Pricing discipline that survives an abnormally low challenge

Getting this right is no longer only about winning; the market is fragile. In the six months to May 2026, 66% of councils saw a provider close, cease trading or hand back a contract, with homecare affected in 44% of areas. Councils overspent adult social care budgets by about £715m in 2025/26, and more than 400,000 people are waiting for assessment, care or a review. Bidding below cost and then handing back is now the sector's dominant delivery risk, which is why commissioners read your price for realism, not cheapness.

Good discipline follows from everything above: align every quality commitment to what the rate funds; model the true cost drivers across the full term, not just year one; use the published benchmarks to argue sustainability; and keep the workings, so that a bid queried as abnormally low can be evidenced line by line. There is a workforce reason too: the homecare vacancy rate was about 9.7% in late 2025, over four times the wider economy, so an under-funded rate that squeezes pay worsens the recruitment and retention your quality answers promise to fix.

Sleep-in and waking night arrangements are where blended rates break down. Bridgend's 7 lot supported living tender sets a different night cover pattern in every lot, so a single night rate across two lots will not survive evaluation.

FAQ

What is the minimum price for homecare in England?

The Homecare Association's minimum price for homecare in England is £34.42 per hour for 2026/27, up from £32.14 in 2025/26 and built on the National Living Wage of £12.71. It is the floor for paying that wage, funding travel and mileage, meeting on-costs and keeping a small surplus; Wales publishes its own figure.

How much do councils actually pay for homecare?

Councils pay an average of about £25.05 per hour for homecare in 2026/27, roughly £9 an hour (about 27%) below the minimum price. Only about 1% of public-body homecare contracts pay enough for sustainable delivery, and about 29% pay below even the direct wage cost of a care worker.

How is price scored in domiciliary care tenders?

Award is on the most advantageous tender, combining quality and price at a weighting such as 60/40, 70/30 or 80/20. Price is usually scored by giving the lowest compliant bid full marks and the rest a proportion, though in care a ceiling or fixed rate near the fair cost of care is common, so you compete on quality within a set price.

What is an abnormally low tender under the Procurement Act 2023?

Under the Procurement Act 2023, in force since 24 February 2025, no fixed percentage defines an abnormally low tender. Before rejecting one, the authority must notify you and give a reasonable opportunity to show it is deliverable, so a costed, benchmarked rate can pass the test.

Do you have to pay care workers for travel time between visits?

Yes. Time travelling between care visits is working time and must count towards the National Minimum Wage, and averaged pay must not fall below it. HMRC can require repayment of arrears, levy penalties and publicly name offenders, so unpaid travel is both a costing error and a legal risk.

The reform picture will keep shifting, with the £86,000 cost cap scrapped in 2024, adult social care reform now sitting with the independent Casey Commission reporting between 2026 and 2028, and a Fair Pay Agreement backed by £500m expected in 2028. Until any of that changes the arithmetic, the winning move is unglamorous: price the contract in front of you against the costs you can evidence today, and never promise in the quality response what the rate cannot pay for.