Concept explainers
Interpretation:Company that would be awarded the contract if categories of quality and price are given
Concept introduction: Bidding is the process used to select the contractor who would do the required work at lowest price. It is the simplest procedure where the cost is calculated and the lowest responsive price is selected to get the work done.
Explanation of Solution
The procurement department of H hotels is evaluating tenders for its newest hotel resort. Four tenders have been received and tender is being evaluated based on quality and price. Quality is being quantized on a
Bid prices are converted based on a
Details of bids are as follows:
So total price for bid would be:
So total price for bid would be:
So total price for bid would be:
So total price for bid would be:
Lowest offer price is from UCcosting
Company | Bid price | Difference in bid price with lowest bid price | Price score | Quality score |
OR LLC | ||||
WC | ||||
UC | ||||
DC |
Now price is given weightage of
Thus weighted score of tender would be:
Company | Price score | Quality score | Weighted average score |
OR LLC | |||
WC | |||
UC | |||
DC |
Under linear averaging method score of each tender will be result of sum of individual score in each category multiplied by corresponding category weight.
DC should be awarded the contract under average weighted linear cost method as it has the highest average weighted score.
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Chapter 9 Solutions
Practical Operations Management
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