Total Cost Modeling

With total cost modeling, you can analyze bids based on three different criteria: lowest price, best score, and lowest total cost. All three methods can be used simultaneously to give you the most information for making the best award decision.

By using this feature, you can designate cost contributions for selected bid factors. Depending on the type of bid factor, costs can be calculated based on the bidder's bid price, the bidder's bid quantity, a predefined cost range, or a user-defined cost. The system can then calculate a cost related to each bidder's response to a bid factor, as well as total line cost and total event cost. This information is displayed during manual analysis to determine an ideal award.

The following example illustrates how the cost modeling can be used. You are purchasing an item that has a warranty bid factor associated with it. You are asking the bidders to indicate the length of warranty provided for the item, with a range of one year to five years. The longer the warranty period provided, the less your organization will need to pay for maintenance and repair costs. You determine that each extra year of warranty provided saves your organization $50 in maintenance and repair per unit. You can assign this cost to the warranty bid factor so that the total cost for this bid factor will be calculated based on the bidder's response. One bidder may bid $1,000 per unit but only provide a one-year warranty, while another bidder may bid $1,100 per unit but provide a five-year warranty. Even though the first bidder has a lower bid price, the second bidder will have an overall lower cost because the bidder is providing the full five-year warranty.

When you create a sourcing event, the bid factor cost information appears based on the associated defaulting rules. You can add or modify the cost information.

In addition, any changes made by event collaborators are tracked and can be viewed on the Review Event Collaboration page.

See Understanding Event Collaboration.

For auction events, bidders can compete based on score or price only.