Optimum Markup by Direct Solution

Abstract

A direct solution technique determines optimum markup for competitive construction bids using either lowest opposing bid models or average opposing bid models. A graphical representation helps explain the technique. Lowest competing bids can be standardized, and a table shows standardized optimum markup to fit any normally distributed lowest opposing bids. The paper explains: (1) the effects of differing numbers of competitors on the lowest opposing bids; and (2) the relationship between average and lowest opposing bids for differing numbers of competitors. The direct method provides the same answers as an accurate trial‐and‐error method, but it is quicker, once the variables of a normal distribution are calculated. Its quickness leads to easy comparisons for numbers of competitors.