Gates Bidding Strategies and the Decision to Bid

This paper revisits and revises Gates Table 6 [1] for identifying the optimal mark-up in construction contract auction bidding when bidding against a group of competitors for whom a contractor's probability of underbidding each is known. Using Monte Carlo simulation, a known theoretical result is demonstrated in that Gates' formula for combining the individual probabilities is dependent on our cost estimates and competitors' bids following a Weibull density with a common shape parameter. This is then extended to support decision to bid (d2b) decisions by allowing a comparison to be made between the optimal expected profit arising from several bidding opportunities where the probability of underbidding individual bidders is known. A further paper will report on the closed form version of the method.