Incorporating uncertainty in competitive bidding

This paper describes a simple, transparent approach for developing competitive bids, based on an appreciation of cost uncertainty and estimates of the probability of winning with different levels of bid. The process offers an ‘applied’ approach which facilitates an iterative approach to bid development and appropriate consideration of important qualitative factors which are difficult to model. The process is illustrated with a case example which has been well received by practitioners as a teaching case. The focus of the paper is on the careful structuring of issues which lend themselves to quantification, and the facilitation of systematic consideration of issues which do not.