Question

Describe the characteristics of an unbalanced bid. Why would a contractor employ a pricing strategy like this?

Answer 1

Characteristics of unbalanced bid are as follows:

1. Prices for some work will be used at nominal rate, while prices for some other work, will be inflated when the bid is structured.

2. Bid does not reflect the reasonable actual cost as well as the proportionate sharing of the profit for the bidder

3. No any mentioning of the overhead cost and or other indirect cost associated with the project in the bid

4. Posing doubt on the bid that it may lead to the lowest cost to the government if pursued.

A contractor, will deploy this type of pricing strategy, when there will be uncertainties regarding the actual price to incur in the project. It happens when there is expectations to get rise in price or time to pursue the project. Further, the bidder can use it as a strategy, if ascertainment of the actual cost of the project is very difficult to make. As a result, a bidder can go for the mathematically unbalanced bid as a strategy.