Road Pavers, Inc. (RPI) is considering bidding on a county road construction project. RPI has estimated that the cost of this particular project would be $5 million. In addition, the cost of putting together a bid is estimated to be $50,000. The county also will receive four other bids on the project from competitors of RPI. Past experience with these competitors suggests that each competitor’s bid is most likely to be 20 percent over the project cost of $5 million, but could be as low as 5 percent over or as much as 40 percent over this cost. Assume a triangular distribution for each of these bids.
(a) Suppose that RPI bids $5.7 million on the project. Use ASPE to perform 1,000 trials of a simulation on a spreadsheet. What is the probability that RPI will win the bid? What is RPI’s mean profit?
(b) Generate a parameter analysis report to consider eight possible bids between $5.3 million and $6 million in order to forecast RPI’s mean profit for each bid. Which of these bids maximizes RPI’s mean profit?
(c) Generate a trend chart for the eight bids considered in part b.
(d) Use ASPE’s Solver to search for the bid that maximizes RPI’s mean profit.