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.


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