When you are faced with any form of auction. be it online freelance sites, price sensitive bidding only, and the dreaded reverse auctions I have seen recently. Get out of there, they do not value your work and they see you as a commodity.
There will be other chances, this won't be your last chance to bid on a large tranche of work, and there are many other prospects who do value what you can provide.
It is easy to be misled on size. "It's a huge opportunity / contract" has been the cry hat has sent even the largest of us into a profit losing spiral. (Check out the recent losses by BT, Accenture and Fujitsu )
You have far better things to do with your time than spend several months or years fighting to implement an underfunded program with narrow or non-existent profits.
And the worst thing about competing on price is that you could win...
