tender for MS 1 only or?!
Your company is considering whether it should tender for two contracts (MS 1 and MS2) on offer from a government department for the supply of certain components. The company has three options:
a. tender for MS 1 only or
b. tender for MS2 only or
c. tender for both MS I and MS2.
If tenders are to be submitted, the company will incur additional costs. These costs will have to be entirely recouped from the contract price. The risk, of course, is that if a tender is unsuccessful the company will have made a loss.
The cost of tendering for contract MS 1 only is ￡50,000. The component supply cost if the tender is successful would be ￡18,000.
The cost of tendering for contract MS2 only is ￡14,000. The component supply cost if the tender is successful would be ￡12,000.
The cost of tendering for both contract MS 1 and contract MS2 is ￡55,000. The component supply cost if the tender is successful would be ￡24,000.
For each contract, possible tender prices have been determined. In addition, subjective assessments have been made of the probability of getting the contract with a particular tender price as shown below. Note here that the company can only submit one tender and cannot, for example, submit two tenders (at different prices) for the same contract.
Option Possible tender
prices (￡) Probability of
getting contract
MS 1 only 130,000 0.20
115,000 0.85
MS2 only 70,000 0.15
65,000 0.80
60,000 0.95
MS 1 and MS2 190,000 0.05
140,000 0.65
In the event that the company tenders for both MS 1 and MS2 it will either win both contracts (at the price shown above) or no contract at all.
What do you suggest the company should do and why? What are the downside and the upside of your suggested course of action?
A consultant has approached your company with an offer that in return for ￡20,000 in cash she will ensure that, if you tender ￡60,000 for contract MS2 only, your tender is guaranteed to be successful. Should you accept her offer or not? Give reasons for your decision.
a. tender for MS 1 only or
b. tender for MS2 only or
c. tender for both MS I and MS2.
If tenders are to be submitted, the company will incur additional costs. These costs will have to be entirely recouped from the contract price. The risk, of course, is that if a tender is unsuccessful the company will have made a loss.
The cost of tendering for contract MS 1 only is ￡50,000. The component supply cost if the tender is successful would be ￡18,000.
The cost of tendering for contract MS2 only is ￡14,000. The component supply cost if the tender is successful would be ￡12,000.
The cost of tendering for both contract MS 1 and contract MS2 is ￡55,000. The component supply cost if the tender is successful would be ￡24,000.
For each contract, possible tender prices have been determined. In addition, subjective assessments have been made of the probability of getting the contract with a particular tender price as shown below. Note here that the company can only submit one tender and cannot, for example, submit two tenders (at different prices) for the same contract.
Option Possible tender
prices (￡) Probability of
getting contract
MS 1 only 130,000 0.20
115,000 0.85
MS2 only 70,000 0.15
65,000 0.80
60,000 0.95
MS 1 and MS2 190,000 0.05
140,000 0.65
In the event that the company tenders for both MS 1 and MS2 it will either win both contracts (at the price shown above) or no contract at all.
What do you suggest the company should do and why? What are the downside and the upside of your suggested course of action?
A consultant has approached your company with an offer that in return for ￡20,000 in cash she will ensure that, if you tender ￡60,000 for contract MS2 only, your tender is guaranteed to be successful. Should you accept her offer or not? Give reasons for your decision.
Answers:
Best Answer - Chosen by Voters
We can't quite understand your query. Would you describe with more details? Thank you.
.
