Awarding Sub-Contracts

Generic Situation:

Companies often need to subcontract for supplies or work and need an optimal methodology for determining how to award the contract.

Example:

Scarpelli Construction builds commercial buildings and has recently signed contracts to construct 4 buildings in different locations throughout Northern New York. Each project requires a great deal of cement to be delivered to the building sites. Scarpelli has received bids from three independent cement suppliers, the data is summarized below:

BidderProject 1Project 2Project 3Project 4Maximum Supply
Company 1$120$115$130$125525
Company 2$100$150$110$105450
Company 3$140$95$145$165550
Cost Per Delivered Ton of Cement

In addition to the maximum supplies that each cement supplier has, there are some conditions - Company 1 will not supply orders for less than 150 tons, Company 2 cannot supply more than 200 tons to one of the projects, and Company 3 will accept orders that add up to 200, 400, or 550 tons.

Profit Maximizing Solution:

The following amounts should be purchased to insure the cost optimal completion of the project.

BidderProject 1Project 2Project 3Project 4
Company 100175360
Company 2450000
Company 302751250
Amounts to Purchase