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Multi-period resource allocation for estimating project costs in competitive bidding

Author

Listed:
  • Yuichi Takano

    (Senshu University)

  • Nobuaki Ishii

    (Bunkyo University)

  • Masaaki Muraki

    (Tokyo Institute of Technology)

Abstract

In competitive bidding for project contracts, contractors estimate the cost of completing a project and then determine the bid price. Accordingly, the bid price is markedly affected by the inaccuracies in the estimated cost. To establish a profit-making strategy in competitive bidding, it is crucial for contractors to estimate project costs accurately. Although allocating a large amount of resources to cost estimates allows contractors to prepare more accurate estimates, there is usually a limit to available resources in practice. To the best of our knowledge, however, none of the existing studies have addressed the resource allocation problem for estimating project costs in competitive bidding. To maximize a contractor’s expected profit, this paper develops a multi-period resource allocation method for estimating project costs in a sequential competitive bidding situation. Our resource allocation model is posed as a mixed integer linear programming problem by making piecewise linear approximations of the expected profit functions. Numerical experiments examine the characteristics of the optimal resource allocation and demonstrate the effectiveness of our resource allocation method.

Suggested Citation

  • Yuichi Takano & Nobuaki Ishii & Masaaki Muraki, 2017. "Multi-period resource allocation for estimating project costs in competitive bidding," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 25(2), pages 303-323, June.
  • Handle: RePEc:spr:cejnor:v:25:y:2017:i:2:d:10.1007_s10100-016-0438-7
    DOI: 10.1007/s10100-016-0438-7
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    References listed on IDEAS

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    Cited by:

    1. Josef Jablonský & Ali Emrouznejad & Mehdi Toloo, 2018. "Editorial: Special issue on data envelopment analysis," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 26(4), pages 809-812, December.
    2. Petr Fiala, 2018. "Project portfolio designing using data envelopment analysis and De Novo optimisation," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 26(4), pages 847-859, December.

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