Before submitting its tender, the supplier should attempt to ascertain exactly what the buyer wants. Specifications will be provided by the buyer, of course, in either general or detailed terms, but even detailed specifications are unlikely to be complete, in the sense that there will remain room for discretion on the supplier’s part in the design, quality, and other aspects of the work to be carried out. Knowledge of what the supplier expects to pay, how much quality is expected at that price, whether a risk-sharing bid would be entertained, and so on would allow the supplier to tailor its tender to fit the buyer’s preferences exactly and thus increase the probability of winning the contract.
To achieve a better understanding of the buyer’s choice problem and how the supplier’s tender may better serve the buyer’s objectives, we shall look at the competitive bid problem from the buyer’s perspective. The purchasing agent responsible for selecting the winning bid must go through a decision process to arrive at that decision. One such decision process is known as “value analysis.”