Risk Analysis and Optimization of the (Un)Balanced Bid

There are several reasons for a contractor to consider submitting an unbalanced bid including the timing of income, convenience, increased profit, and reduced total bid amount. A method using spreadsheets for optimizing a bid for income timing has been described by Dr. Khaled Nassar. This article addresses the legal and practical aspects of unbalanced bidding and concludes that, while legal and economic risks may exist in connection with unbalanced bidding, the practice can provide a real benefit unbalancing a bid entails certain risks, both with economic and legal impacts. A stochastic model with Monte Carlo simulation will enhance the analysis of the risk in the balanced bid. Provided a contractor can appreciate areas of potential unbalance, including quantity variation, unbalanced bids present an opportunity to increase the probability that the planned indirect costs and profit will be recovered.