Question 2 of SECTION 2 Assume that ALAMBDAXY is a large company with branches in all...

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Question 2 of SECTION 2 Assume that ALAMBDAXY is a large company with branches in all cities in Australia. ALAMBDAXY is one of the prequalified organisations in a large infrastructure project "INFRAZAB" for the State Government in Victoria. In general, the public sector client will award the contract to the lowest responsive bidder in their competitive procurements. As ALAMBDAXY decides to bid in the competitive selection in this project, it should decide how much to bid. ALAMBDAXY's cost to bid in this project is $85000. If ALAMBDAXY is successful in getting the contract award in the competitive procurement, their cost of fulfilling the contract is $2.5 millions. Due to high complexities and technology requirements, there is 20% probability that there may not be any other bidders competing in this INFRAZAB project and still the probability of other bidders competing is 80%. Even if there are other bidders competing, there is a probability distribution on the bids as below: ALAMBDAXY's Bid 1. Low bid: $2.6 Millions 2. Medium bid: $2.75 Millions 3. High bid: $2.9 Millions Probability of competing bid(s) from other bidder(s) (i) Probability of a competing bid less than this low bid (i.e. $2.6M) = 20% (ii) Probability of competing bid in between this low bid (i.e. $2.6M) and medium bid (i.e. 2.75M) = 40% (iii) Probability of competing bid in between this Medium bid (i.e. $2.75M) and medium bid (i.e. 2.9M) 30% (iv) Probability of competing bid greater than this high bid (i.e. $2.9M) = 10% For example, if ALAMBDAXY bids $2.75m and wins the bid, their profit will be $250K less the cost of placing the bid ($85K), i.e. 165K. In this bidding, it's assumed that ALAMBDAXY would gain the amount of their bid, until they reach the chance event of underbidding a competitor or not. If ALAMBDAXY lose the bid, the amount of their bid is simply reversed. All probabilities and values are shown above the tree and referenced by the tree for calculations. Based on the probabilities and expected monetary values, you are required to conduct decision analysis and recommend the best decision strategy for ALAMBDAXY in this project procurement Following figure portrays the Decision Tree model for this problem. -Bidding Decision Bid TRUE -$85,000 (Cost to bid) Place a Bid Do Not Bid FALSE Yes FALSE Low $2,600,000 No Bid Amount Yes TRUE Medium $2,750,000 No Yes FALSE High $2,900,000 No 0.0% $0 $0 Competing Bid Competing Bid Competing Bid Yes 80.0% -$2,500,000 80.0% Underbid Competitor $0 20.0% No -$2,600,000 20.0% 0.0% -$2,500,000 $15,000 i.e. 2,600,000-(2,500,000 +85,000) 40.0% Yes -$2,500,000 80.0% $0 Underbid Competitor No 60.0% -$2,750,000 20.0% -$2,500,000 20.0% $165,000 10.0% Yes -$2,500,000 80.0% Underbid Competitor $0 90.0% NO -$2,900,000 20.0% 0.0% -$2,500,000 $315,000 0.0% $15,000 i.e. 2,600,000-(2,500,000+85,000) 0.0% -$85,000 32.0% $165,000 i.e. 2,750,000-(2,500,000+85,000) 48.0% -$85,000 0.0% $315,000 i.e. 2,900,000-(2,500,000 +85,000) 0.0% -$85,000 Question 2 of SECTION 2 Assume that ALAMBDAXY is a large company with branches in all cities in Australia. ALAMBDAXY is one of the prequalified organisations in a large infrastructure project "INFRAZAB" for the State Government in Victoria. In general, the public sector client will award the contract to the lowest responsive bidder in their competitive procurements. As ALAMBDAXY decides to bid in the competitive selection in this project, it should decide how much to bid. ALAMBDAXY's cost to bid in this project is $85000. If ALAMBDAXY is successful in getting the contract award in the competitive procurement, their cost of fulfilling the contract is $2.5 millions. Due to high complexities and technology requirements, there is 20% probability that there may not be any other bidders competing in this INFRAZAB project and still the probability of other bidders competing is 80%. Even if there are other bidders competing, there is a probability distribution on the bids as below: ALAMBDAXY's Bid 1. Low bid: $2.6 Millions 2. Medium bid: $2.75 Millions 3. High bid: $2.9 Millions Probability of competing bid(s) from other bidder(s) (i) Probability of a competing bid less than this low bid (i.e. $2.6M) = 20% (ii) Probability of competing bid in between this low bid (i.e. $2.6M) and medium bid (i.e. 2.75M) = 40% (iii) Probability of competing bid in between this Medium bid (i.e. $2.75M) and medium bid (i.e. 2.9M) 30% (iv) Probability of competing bid greater than this high bid (i.e. $2.9M) = 10% For example, if ALAMBDAXY bids $2.75m and wins the bid, their profit will be $250K less the cost of placing the bid ($85K), i.e. 165K. In this bidding, it's assumed that ALAMBDAXY would gain the amount of their bid, until they reach the chance event of underbidding a competitor or not. If ALAMBDAXY lose the bid, the amount of their bid is simply reversed. All probabilities and values are shown above the tree and referenced by the tree for calculations. Based on the probabilities and expected monetary values, you are required to conduct decision analysis and recommend the best decision strategy for ALAMBDAXY in this project procurement Following figure portrays the Decision Tree model for this problem. -Bidding Decision Bid TRUE -$85,000 (Cost to bid) Place a Bid Do Not Bid FALSE Yes FALSE Low $2,600,000 No Bid Amount Yes TRUE Medium $2,750,000 No Yes FALSE High $2,900,000 No 0.0% $0 $0 Competing Bid Competing Bid Competing Bid Yes 80.0% -$2,500,000 80.0% Underbid Competitor $0 20.0% No -$2,600,000 20.0% 0.0% -$2,500,000 $15,000 i.e. 2,600,000-(2,500,000 +85,000) 40.0% Yes -$2,500,000 80.0% $0 Underbid Competitor No 60.0% -$2,750,000 20.0% -$2,500,000 20.0% $165,000 10.0% Yes -$2,500,000 80.0% Underbid Competitor $0 90.0% NO -$2,900,000 20.0% 0.0% -$2,500,000 $315,000 0.0% $15,000 i.e. 2,600,000-(2,500,000+85,000) 0.0% -$85,000 32.0% $165,000 i.e. 2,750,000-(2,500,000+85,000) 48.0% -$85,000 0.0% $315,000 i.e. 2,900,000-(2,500,000 +85,000) 0.0% -$85,000