Estimates within the proposal to allow adequate budgeting

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Reference no: EM131082919

A company (called RM) is developing a new product. Two manufacturers responded with proposals: Contractor A and Contractor B. The RM’s desired product performance specs included cost overrun estimates within the proposal to allow adequate budgeting. Both contractors bid approximately $3.0 million for RM’s initial development expenditure. Because the proposal specifications from both companies were compatible, RM will award the contract based on cost overrun estimates. RM preferred Cost Overrun (in Thousands): Best Case: $0 Worst Case: $250 Most Likely: $75 50-50 Chance: $25 +/- from Most Likely The cost overrun estimates from the manufacturers were as follows: Contractor A (in Thousands): Best Case: $0 Worst Case: $350 Most Likely: $150 50-50 Chance: $75 +/- from Most Likely 2 Contractor B (in Thousands): Best Case: $0 Worst Case: $500 Most Likely: $75 50-50 Chance: $50 +/- from Most Likely 1. a) Using the fractile method, find the cost overrun expected value for the company (RM), Contractor A and Contractor B. 1. b) What kinds of options the RM company have? Analyze the result and choose a contractor. Please explain in detail why you choose the contractor.

Reference no: EM131082919

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