You are a Contractor who is bidding on a highway project. You know all of your four competitors (W, X, Y, and Z) and you have sufficient historical bidding data related to each of these competitors. You also have some information related to the market conditions and your current Return On Investment (ROI). Given this information, you need to select the profit that you will use for this bid. You have the following information:  Your job overhead (without tax and bonds), tax, office overheads, and bonds are 17.5%, 5.8%, 9.3%, and 2.1%, respectively.  You have previously bid against these 4 competitors in several projects. Not all of these projects were highway projects though; these were a variety of project types. Accordingly, you have the historical winning probability over each of these 4 competitors, see Table-2.  The 4 competitors did bid previously in a number of highway projects. These projects included similar items to those that you are bidding on in this project. You know the unit prices that each of these competitors used for each of these bids. Table-3 shows the average unit price for each competitor for each item that you are bidding on.  The current market conditions are as follows:  The project you are bidding on is the first major project of the season.  Your carryover work from the previous year is nearly complete.  You must continue to keep your working crews busy, or else risk losing them to other contractors.  Your Return On Investment (ROI) is currently 10.1%. According to the given information: a) Using BOTH Friedman Model and Gates Model, what is the profit that you are going to select for this bid? Explain. b) Given the current market conditions, would you select a different profit? If so, what is that profit? Explain. c) Given your current ROI, would you select a different profit? If so, what is that profit? Explain. d) Now, considering all given information (including the specific historical bidding information shown in Table-3), what is the final profit that you are going to select for this bid? Explain. Hints:  There is no single or "clear-cut" answer for this question.  You are required to explain the rationale of your answers clearly.  This is a hypothetical situation and limited data are given. As such, indicate any assumptions you make.  Finally, note that the aim of this problem is to see your analysis and rationale of solution rather than "finding an accurate solution". So, again, it is important to show your analysis and explain the rationale of your answers clearly

 

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Table-2 Profit Probability of Winning Over Each Competitor (%) W X Y Z 1-2 0.83 0.73 0.65 0.59 3-4 0.81 0.69 0.63 0.55 5-6 0.75 0.64 0.59 0.51 7-8 0.73 0.63 0.55 0.47 9-10 0.69 0.57 0.51 0.39 11-12 0.51 0.41 0.37 0.31 13-14 0.45 0.35 0.29 0.26 Table-3 Your Estimated No. Item Description Estimated Quantity for this Contract Unit Direct Unit Cost for Historical Data about Competitors from Several Similar Projects (Competitors' Average Unit Prices ($)) this Contract ($) W X Y 1 Remove concrete curb 2,550 m 25.30 43.00 41.00 45.00 48.00 2 Remove concrete sidewalk 3,670 m 26.70 61.00 75.00 70.00 75.00 3 Concrete removal - wall surfaces 97 m 2,355.00 2,730.00 2,645.00 2,650.00 2,603.00 4 Concrete removal - horizontal surfaces 69 m 2,420.00 5 Concrete removal overhead surfaces 51 m 2,103.00 2,481.00 2,545.00 2,758.00 2,790.00 2,410.00 2,380.00 2,845.00 2,740.00 6 Excavation 12,373 m 51.00 101.00 103.00 97.00 108.00 7 Granular backfill/grading 19,032 Tonne 27.45 77.00 69.00 79.00 75.00 8 Supply and place 150mm subdrain 1,730 m 71.23 141.00 127.00 125.00 147.00 9 Form & pour 125mm sidewalk on grade 3,825 m 150.18 237.00 279.00 251.00 256.00 10 Form & pour curb (all types) 2,005 m 231.82 339.00 303.00 303.00 335.00 11 Form & pour walls 4,735 m 850.83 1,472.00 1,701.00 1,580.00 1,643.00 12 Pour concrete overlay 2,532 m 1734.64 2,760.00 13 Form & pour concrete slab 9,400 m 2,775.13 14 Apply concrete sealer 6,456 m 15 Place reinforcing steel (Supply by others) 273 Tonne 38.60 2,735.64 2,739.00 2,730.00 2,697.00 3,989.00 3,881.00 3,945.00 3,899.00 88.00 95.00 99.00 3,760.00 3,690.00 91.00 3,524.00 3,937.00 Table-2 Profit Probability of Winning Over Each Competitor (%) W X Y Z 1-2 0.83 0.73 0.65 0.59 3-4 0.81 0.69 0.63 0.55 5-6 0.75 0.64 0.59 0.51 7-8 0.73 0.63 0.55 0.47 9-10 0.69 0.57 0.51 0.39 11-12 0.51 0.41 0.37 0.31 13-14 0.45 0.35 0.29 0.26 Table-3 Your Estimated No. Item Description Estimated Quantity for this Contract Unit Direct Unit Cost for Historical Data about Competitors from Several Similar Projects (Competitors' Average Unit Prices ($)) this Contract ($) W X Y 1 Remove concrete curb 2,550 m 25.30 43.00 41.00 45.00 48.00 2 Remove concrete sidewalk 3,670 m 26.70 61.00 75.00 70.00 75.00 3 Concrete removal - wall surfaces 97 m 2,355.00 2,730.00 2,645.00 2,650.00 2,603.00 4 Concrete removal - horizontal surfaces 69 m 2,420.00 5 Concrete removal overhead surfaces 51 m 2,103.00 2,481.00 2,545.00 2,758.00 2,790.00 2,410.00 2,380.00 2,845.00 2,740.00 6 Excavation 12,373 m 51.00 101.00 103.00 97.00 108.00 7 Granular backfill/grading 19,032 Tonne 27.45 77.00 69.00 79.00 75.00 8 Supply and place 150mm subdrain 1,730 m 71.23 141.00 127.00 125.00 147.00 9 Form & pour 125mm sidewalk on grade 3,825 m 150.18 237.00 279.00 251.00 256.00 10 Form & pour curb (all types) 2,005 m 231.82 339.00 303.00 303.00 335.00 11 Form & pour walls 4,735 m 850.83 1,472.00 1,701.00 1,580.00 1,643.00 12 Pour concrete overlay 2,532 m 1734.64 2,760.00 13 Form & pour concrete slab 9,400 m 2,775.13 14 Apply concrete sealer 6,456 m 15 Place reinforcing steel (Supply by others) 273 Tonne 38.60 2,735.64 2,739.00 2,730.00 2,697.00 3,989.00 3,881.00 3,945.00 3,899.00 88.00 95.00 99.00 3,760.00 3,690.00 91.00 3,524.00 3,937.00