Discuss why contractors must make bid/no-bid decisions and the factors involved in making these decisions. Give an example of when a contractor should bid and when a contractor should not bid.

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Keith Roy

Business

26 June, 03:21

Discuss why contractors must make bid/no-bid decisions and the factors involved in making these decisions. Give an example of when a contractor should bid and when a contractor should not bid.

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Kailyn · Answer 1

a. Discuss why contractors must make bid/no-bid decisions:

Contractors have to make a decision to be bid or not to be since the bidding process is usually long and costly.

b. Factors involved in making these decisions:

Opportunity cost Technical requirements Financial status Legal requirements

c. A contractor should bid when the project aligns well with the contractors business goals and has a competitive edge over other bidders, however, a contractor should not bid when there is high probability of project failure or when there is inadequate capabilities in terms of funding and experience.

Explanation:

a.

Bid/no-bid decisions usually follow a request for proposal (RFP). A request for proposal (RFP) is usually a document that seeks a business proposal to be made using a a bidding process by an organization that seeks the procurement of a good, service or an asset. In the construction business, the services are offered by contractors. The RFP usually contains all the information about what the client wants including; the end product and the time frame within which the contract has to be completed. They also include the professional requirements for the workers that will be needed.

Once a contractor has received a RFP, they decide whether or not to bid. Bidding is the process through which the contractor expresses interest in offering his/her services for a certain monetary compensation. Contractors have to make a decision to be bid or not to be since the bidding process is usually long and costly.

b.

The following factors are involved in making bid/no-bid decisions;

1. Opportunity cost: this is the cost of an alternative option to the bidding process. If the opportunity is great, then contractors would make a decision not to bid, however, if the opportunity cost is low, the contractor will make a decision to bid.

2. Technical requirements: the contractors needs to assess if they can meet the technical requirements in terms of expertise and quality. It would be advisable not to bid if they don't meet the requirements.

3. Financial status: the contractor should also consider evaluating the total cost that the project might need. This cost should be checked against the contractor's financial situation to determine if they will be able to handle the project without financial strain.

4. Legal requirements: the contractor needs to check the legal requirements of the project and determine if they can execute the project without going beyond the threshold of the law. One should asses exposure to legal risks before making a decision.

c.

A contractor should bid when the project aligns well with the contractors business goals and has a competitive edge over other bidders, however, a contractor should not bid when there is high probability of project failure or when there is inadequate capabilities in terms of funding and experience.