Evaluating and comparing bidding optimization effectiveness

Competitive bidding is the means by which pricing of numerous services takes place. Optimization models have been developed to support bidding, but no consistent and structured methodology has been followed in evaluating those models. This paper provides such a methodology and demonstrates it in the comparison of three bidding optimization approaches aimed at profit maximization. The methodology represents a modification and refinement of previously used evaluation approaches. In addition, the methodology incorporates the determination of an upper bound on effectiveness in order to provide an indicator of how much improvement in effectiveness remains. Real construction bidding data are used to demonstrate the comparison of the optimization procedures.