Pricing in a Closed Bid Environment

Abstract

Closed competitive bidding results in business awarded to qualified suppliers primarily on the basis of price. In developing a bidding strategy the firm must balance the objective of making a profit against the requirement of bidding low enough to win the job. Quantitative bidding models have been developed to aid the bidder in assessing the probability that a particular bid will return an optimum level of profit. The models, however, suffer from constraints which limit their usefulness. A systems model is proposed, which introduces a new set of variables and expands the information base upon which the bidding strategist may draw.