Department of Procurement in Kuvuku Land has to decide which of the four bidding companies is to be awarded the correctional services' IT upgrade tender. The directors believe that the tender will assist the correctional services centres with updating and expanding the centers' IT capacities in line with modern innovations like electronic fingerprinting, electronic monitoring for parolees, and even to allow centers to use IT to let victims know more about parole hearings.

The tender will be awarded to the bidding company that meets the price requirement and not the functionality as well as administrative requirements as previously done. However the directors agreed that the functionality and the administrative requirements will be considered when there are parties, during the evaluation phase, that might raise concerns relating to these requirements.

There is a 40% chance that the bidder will reasonably comply with some Sections of the Constitution of Kuvuku Land, a 10% chance the bidder will comply fully with some Sections of the Constitution of Kuvuku Land and a 50% chance that the bidder will not comply with some Sections of the Constitution of Kuvuku Land.

The company uses expected value to make this type of decision

The department provided the following information:

Bidder's law compliance	Company A	Company B	Company C	Company D
	R'000	R'000	R'000	R'000
Reasonably comply	5000	4800	5500	6000
Comply fully	4600	4700	3500	3000
Not comply	4300	4600	4000	5000

Zindlo Limited, market research company, believes it can provide perfect information on how much the actual cost could be the IT infrastructure typically required for projects like this IT upgrade tender.

Required:

Calculate the maximum amount that should be paid for the information from Zindlo Limited

Answer rating: 100% (QA)

The expected value in case of making an investment is the value that is anticipated for an investmen... View the full answer