Bidding for contests
Article Abstract:
The letting of contracts for product development and production services presents unique challenges because of the uncertainty it involves, including those relating to specifications, volume, duration and costs. Studies on industrial marketing suggest that multiple sourcing, particularly dual sourcing, could be used to manage the higher risks faced by the buyers of the aforementioned services. Unfortunately, there is a dearth of dual sourcing paradigms that examine the selection and control process in an integrated manner. Except for research on single sourcing, extant theoretical modeling literature on industrial procurement deals mostly with the issues of selection and control separately. To fill this gap in procurement theory, an integrated model of bidding is presented that is appropriate for a particular kind of cost-containment contest between service providers.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1995
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Implicit cost allocation and bidding for contracts
Article Abstract:
The allocation of indirect costs in pricing decisions was investigated by analyzing a model of the bidding process. The model described a firm that incurred indirect costs while participating in several bids for projects. The optimal bidding policy was derived, and it was shown that direct costs, an implicit allocation of fixed costs, and a bidding competition term comprised the optimal bid.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1990
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