A simplified unbalanced bidding model

Much research effort to date has focused on the development and use of bidding models in optimizing contractors ’ bid prices in competitive tendering environments. The objective of such models, incorporating all the complexity associated with modelling a project’s revenue and its costs, has been to maximize a project’s profit. Unbalanced bidding models, permitting differentiated mark-up to all of a project’s items of work, have also been unnecessary complicated by incorporating consideration of a project’s item costs. It is shown here that unbalanced bidding models have been unnecessarily complicated by incorporating consideration of a project’s item costs. Bidding models can be significantly simplified by having the objective of maximizing a project’s top-line revenue rather than maximizing bottom-line profit. A new model, incorporating all three standard effects of item price loading: namely, front-end loading, individual-rate loading, and back-end loading, is proposed that gives effect to determining the optimum pricing for a project’s component items.