Mark-up rate (%) Percentage of contracts won at that rate (%) 0 10 15 20 25 30 3
ID: 1177407 • Letter: M
Question
Mark-up rate (%)
Percentage of contracts won at that rate (%)
0
10
15
20
25
30
35
95.9
84.8
65.4
41.3
15.7
3.0
0.2
a. Why would your company have bid with a zero mark-up on some past tenders? Why didn%u2019t it win all of those contracts?
b. What is the bid price that maximizes the expected contribution of the contract?
c. Why, or why not, is the fixed-price mode of bidding likely to be the best one to use for this contract?
2. In calculating the incremental cost of a particular project, how would you treat the possible future costs of a lawsuit that may occur as a result of this project, where the cost of the lawsuit might range from $10,000 to $500,000 with an associated probability distribution?
Mark-up rate (%)
Percentage of contracts won at that rate (%)
0
10
15
20
25
30
35
95.9
84.8
65.4
41.3
15.7
3.0
0.2
Explanation / Answer
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