In this study, we address the long-term project pricing problem for
a company that operates in the defense industry. The pricing
problem is a bid project pricing problem which includes various
technical and financial uncertainties, such as estimations of
workhour content of the project and exchange & / inflation rates.
We propose a Robust Optimization (RO) approach that can deal
with the uncertainties during the project lifecycle through the
identification of several discrete scenarios. The bid project&rsquo / s
performance measures, other than the monetary measures, for
R& / D projects are identified and the problem is formulated as a
multi-attribute utility project pricing problem. In our RO approach,
the bid pricing problem is decomposed into two parts which are
v
solved sequentially: the Penalty-Model, and the RO model. In the
Penalty-Model, penalty costs for the possible violations in the
company&rsquo / s workforce level due to the bid project&rsquo / s workhour
requirements are determined. Then the RO model searches for the
optimum bid price by considering the penalty cost from the
Penalty-Model, the bid project&rsquo / s performance measures, the
probability of winning the bid for a given bid price and the
deviations in the bid project&rsquo / s cost.
Especially for the R& / D type projects, the model tends to place
lower bid prices in the expected value solutions in order to win the
bid. Thus, due to the possible deviations in the project cost, R& / D
projects have a high probability of suffering from a financial loss in
the expected value solutions. However, the robust solutions
provide results which are more aware of the deviations in the bid
project&rsquo / s cost and thus eliminate the financial risks by making a
tradeoff between the bid project&rsquo / s benefits, probability of winning
the bid and the financial loss risk. Results for the probability of
winning in the robust solutions are observed to be lower than the
expected value solutions, whereas expected value solutions have
higher probabilities of suffering from a financial loss.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/3/12612104/index.pdf |
| Date | 01 July 2010 |
| Creators | Balkan, Kaan |
| Contributors | Meral, Sedef |
| Publisher | METU |
| Source Sets | Middle East Technical Univ. |
| Language | English |
| Detected Language | English |
| Type | M.S. Thesis |
| Format | text/pdf |
| Rights | To liberate the content for public access |
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