Showing papers on "Bidding published in 1978"

Valuation consequences of cash tender offers

Abstract: ALTHOUGH THE VALUATION consequences of tender offer have received some attention, this method of altering corporate control needs additional investigation and clarification.' The focus on valuation consequences may shed some light on the efficacy of legislation requiring more complete disclosure of intended tender offers.2 Alternatively stated, the question is whether incumbent management should be allowed to utilize corporate resources to resist such take-overs.3 This paper has three purposes: first, we examine the stock returns of target firms prior to the announcement of a tender offer. Second, we evaluate tender offers according to their success or failure and resistance or non-resistance by incumbent management of the target firm. Our final purpose is to investigate the returns to bidding firms prior and subsequent to the tender offer announcement. The discussion proceeds as follows. Section I develops the anticipated valuation consequences of a tender offer announcement. Section II presents the data description and the methodology of the measurement of abnormal returns. Section III evaluates the results and provides an interpretation of the return behavior. Section IV summarizes the findings and offers some concluding remarks. I. VALUATION CONSEQUENCES In an efficient market, prices fully reflect the value of the firm. Hence the rate of return investors receive on these securities provides a measure of how these resources are utilized. Below normal rates of return are consistent with unanticipated poor operating results which could be (but not necessarily) caused by inefficient utilization of resources. A string of abnormally low returns could signal potential bidders that resources might be utilized inefficiently.4 If that were the

Competitive bidding for offshore petroleum leases

Abstract: This paper develops a formal model of competitive bidding to analyze some aspects of the federal offshore oil leasing system. The lease sales of interest are often characterized by small numbers of auction participants and by high levels of uncertainty regarding the true values of the leases offered. The model suggests that these circumstances may lead to the capture of a substantialfraction of economic rent by the purchases of leases. Indeed, our results suggest that the government should be willinig to fund a substantial exploration effort to bring better presale information into the public domain. Some effects of the level of uncertainty and the number of competing bidders on industry efficiency are also considered.

Bidding Strategy Using Multiple Regression

Abstract: Multiple regression analysis is applied to construction competitive bidding to give a contractor new insights that will help him compete more effectively. Data from 48 projects bid by a contractor are collected and analyzed. Two models are developed, one for use in deciding whether or not to estimate and bid a job and one to aid in his markup decision. Expected value criteria are applied to both decisions. The proposed two-phase bidding strategy is demonstrated on two jobs and problems in the contractor's competitive position are diagnosed using the model. Practicalities of model development for other contractors are considered.

Cost Uncertainty in Competitive Bidding Models

Abstract: In this paper a number of issues will be examined regarding uncertainty about cost estimates in competitive bidding models First, the value of information is derived when the relevant parameters are known Next, it is shown how the usual procedure for finding the optimal price can be improved by taking into account information regarding the relation between the ratio of estimated cost to real cost for winning bids, and markup Finally, a trial-and-error procedure is presented for determining the parameters needed to estimate the value of information

Optimal Bid Prices for Unit Price Contract

Abstract: In this type of contract, the work is broken down by the owner into bid items with an estimated work quantity for each item. In preparing a bid, a contractor estimates the direct cost of each item and then has to spread overhead, profit, and contingency to the bid items, so that these amounts will be recovered when the project is complete. The contractor's bidding strategy is complicated by the uncertainties of the work quantities and which items may be deleted from the contract. To minimize the cash investment required by the contract and maximize the expected profit, it is beneficial to unbalance the bid prices by allocating a larger than proportional share of the margin and overhead to those items performed early in the life of the project and those likely to overrun the owner's estimated quantity. This paper develops an easily implemented model of the preceding problem which permits the calculation of optimal unbalanced bid prices that will maximize the expected net worth of the project for a given desired margin.

Bidding for Securities: The Effect on the Issuer's Interest Costs

Abstract: Richard West (1965) and Reuben Kessel (1971) have both reported that on new issues of taxexempt securities the issuer's interest costs decline sharply as the number of bidders increases. Moreover, they also agree that this reduction in the bid yield is primarily reflected in a decline in the yield to maturity at which the bonds are offered to the public rather than a decline in the underwriter's spread between the bid and offer yields. 1 However, the two studies differ regarding the level at which an additional bid ceases to affect the bid yield. West (1965) argued that the higher yields on issues which received only one or two bids represented monopsony pricing and found no evidence that additional bids beyond the third would lower the interest rate. On the other hand, Kessel (1971) argued that additional bids represent a more intensive search for the underwriting syndicate that can sell the issue at the lowest rate. Since underwriters serve different customThis paper examines the relationship between the number of bidders for a contract and the resulting price. Attention is focused on the bidding for new bond issues. The theory of order statistics is used to analyze the theoretical magnitude of the sampling or search effect of an additional bidder. A simple model of the bidder's bid decision is then utilized to examine the competitive impact on individual bidders. After previous studies of the municipal bond market by West and Kessel are carefully reviewed, evidence for the corporate bond market is presented.

A Stochastic Model for Bidding

Abstract: Competitive bidding situations involve considering a multiplicity of factors. Organizations must be able to weigh the relative probability of potential projects based on resource usage, project duration and competitor actions to decide which of many possible bids to submit. A bidding strategy designed to maximize expected long run return is crucial, since an organization can usually submit only one bid per project.

Joint bidding ban: pro- and anti-competitive theories of joint bidding in OCS lease sales

Abstract: The Energy Policy and Conservation Act, enacted in January 1976, banned any company with world wide production greater than or equal to 1.6 million barrels per day of oil (and oil equivalent gas) from bidding with any other such company in sales of federal OCS leases. In the 35 OCS lease sales prior to Dec. 1975, about 10% of the total bids consisted of the point bids among the major oil companies. The ban was intented to increase competition for OCS leases. The bidding procedures for these tracts are discussed and analyzed.

The Number of Estimators: A Critical Decision for Marketing Under Competitive Bidding

Abstract: The almost exclusive concern for deciding bid prices has obscured the importance to bidding firms of adjusting other marketing variables. Taking the capacity to prepare bids as one example of these variables, the authors develop a procedure for calculating an optimum number of estimators. A new method is used for computing probabilities of success in bidding, based on the past dispersion of competitor prices. The dispersion is interpreted as reflecting different assessments of the best way to carry out the work required and not, as commonly assumed, a combination of errors in estimating one “true cost” plus differences in competitors’ markups. Applied to a sample of firms, the procedure indicates that additional estimators would increase the expected profits for each firm.

Bidding in Auctions with Multiplicative Lognormal Errors: An Example

Abstract: : Auction models with lognormally-distributed multiplicative errors are used extensively in models of mineral lease sales. Equilibrium strategies are typically difficult to calculate; multiplicative strategies are often used as approximations. An example based on a federal offshore oil lease sale shows that multiplicative strategies may be quite far from being in equilibrium. However, under a special form of repetition, such strategies converge very rapidly to an equilibrium. The effects of any fixed costs, the reservation price, the number of bidders and the variance of the error are examined briefly for this example. (Author)

Licensing and qualification of bidders

Abstract: This paper discusses public policy concerning qualification of bidders on public highway construction contracts, the state laws and regulations relating to licensing of public works contractors and state practice regarding prequalification and post qualification of bidders on highway construction contracts. The prevention of contractor default, the improvement of competitive bidding, and the improvement of the quality of construction are discussed, as well as limits on state police power applied to contractor qualification, and the scope of the licensing requirements. The special status of Federal-Aid Highway projects is also considered. The approaches discussed here-licensing, pre-bid qualification, pre-award qualification-represent well-tested techniques of regulation, and pre-bid qualification enjoys nation-wide adoption. In evolving the current pattern of state laws and regualtions on licensing and qualification, legislative draftsmen must give effect to 2 policies which generally characterize public contract law. One is the policy that public works contracts shall be awarded through competitive bidding procedurs which stimulate as many contractors as possible to bid on a given project. The second is that in competitive bidding the contract is to be awarded to the lowest responsible bidder. State contractor licensing laws in 19 states appear to be able to carry out in initial screening of persons entering the practice of contracting. Licensing laws do not protect the public against the costs of speculative busines risks, inexperience etc. Preventive protection against these risks is provided by other procedures. State statutes, rules etc. show a substantial variety in the method of rating the capacity of contractors and delimiting their eligibility to bid on contracts in accordance with this rating. Court decisions give little help in this area, and the ability of states to exercise continuing influence on contractors activities through authority to suspend and revoke certification is difficult to evalute.

Contract bridge device

Abstract: A solitary knowledgeable individual using the invention can, bid and then play an unlimited multiplicity of printed simulated contract bridge deals with exactly the same results and using the same rules, routines and tactics that he would have employed as a member of a conventional foursome. This ability is the result of programming all reasonable bids into a printed pattern that is cross indexed in such a manner that the bids in the user's hand will designate the responses in the other three hands and then the ability to play the hand just bid is made possible by programming into a geometric, printed pattern the four sets of playing Card Indicia simulating the hands along with two sets of Columnar Indicies, one corner bank of Pertinent Initial Leads, one corner bank showing a Plan of Attack, one corner bank of Sequence Adjustment Cues. Both the Bidding Cross and the Playing Square are presented as separate elements of the invention capable of independent functioning and independent pertinent employment but, brought together with minor adjustments in order to serve a more comprehensive purpose. For this reason the Bidding Cross and the Playing Square are presented in the printed form of the Deal Sheet and fitted with a Template, that with its matching patterns of apertures, slides and covers provides the means for the concealment and timely exposure of the underlying data on the Deal Sheet that rests in a Tray which serves to orient the Deal Sheet and the Template, and the types and complexity of the hands that can be programmed for the invention is limited only by the number of spaces within the Bidding Cross, which are variable at will, and the number of Pertinent Initial Leads and Sequence Adjustment Cues desired.

System Simulation in Forest Engineering

Abstract: THE mathematical, logical, statistical, and computa-tional concepts underlying system simulation are briefly described. Selected simulation applications in forest engineering, especially, those in fabrication and interfacing of new equipment, man-machine configura-tions, equipment scheduling and sequencing, competitive bidding, inventory control, and economic analysis are discussed. It is recommended that resource managers be exposed to the concepts underlying system simulation for the development of profitable applications.

Investigation of the lognormality of offshore oil and gas lease bidding data: Cramer-von Mises one-sample test

Abstract: Investigations into the probability distribution of bids on offshore oil and gas leases have been hindered by the small samples available for goodness-of-fit testing. One method is outlined by which sample sizes can be increased when the specific distribution of interest is the lognormal. This method is applied first to actual bidding data, and then to data generated according to various known probability distributions.

Federal energy resource leasing policy

Abstract: Federal leasing policies for energy resource development on public lands are examined in terms of several issues ranging from basic goals to specific regulations on bidding. Present laws emphasize a rational development that protects the environment and gives the public a fair market return. The author recommends a change in mining leasing that would maximize the present value or economic rents. He suggests: (1) sealed bidding in competition for leases; (2) granting leases on the basis of bonus bidding, with joint and sequential bidding allowed, and with provision for a modest royalty; (3) offering leases on the Outer Continental Shelf at the highest rate sustainable until the affected industries can make corresponding adjustments in capacity; (4) offering leases on the public domain in response to nominations; (5) internalizing the costs of environmental damage, preferably by taxes that measure damage; and (6) compelling the unitization of all oil and gas reservoirs discovered on federal lands, while granting operators freedom to select the rate of extraction. 15 references and footnotes.

A Decision Analysis Approach to Repetitive Competitive Bidding

Abstract: Discusses how a repetitive competitive bidding model, developed previously, can be adapted to the differing features of the situation. Focuses, first, on identifying the implications for decision analysis of the strategic nature of repetitive bidding and then on the impact of data to aid in winning a tender. Uses a real example from the construction industry which, for confidentiality reasons, is called Whernside Ltd. States the company is one operating a world‐wide spread of construction and development activities such as; civil engineering, private housing, property development, building, dredging, mining, mechanical engineering, foundation engineering and concrete products manufacture. Tabulates the company's turnover and profit in detail, and demonstrates that if bidding activity is to be continued, the formulation of a long‐term strategy must aim to set a perspective in the prescription of individual bids, so the long‐term accrued benefits are, in some sense, optimal. Documents the tactical bidding decision structure using figures by aid of explanation and goes into great detail by way of pinpointing the bid process. Concludes that from the discussion conclusions may be drawn and the three main ones paragraphed and spelt out with recommendations.

Bidding for the Sake of Follow-On Contracts: How low should a company bid on an initial contract in order to win a more profitable follow-on contract?

Abstract: tions in which: (a) the opportunity exists to bid on a given contract; (b) a \"follow-on\" contract is likely; and (c) the firm winning the initial contract has a substantial advantage in the follow-on contract negotiations. Such situations are common where contracts are large (such as in the aerospace and defense industries), where component parts are ordered for equipment with production expected to run several years, or where some degree of customization is required. (Although anticipated change orders to a contract are not exactly \"follow-on,\" the following concepts apply to these as well.) A common strategy considered in such situations is the submittal of a relatively low bid for the initial contract, in the hope of winning the follow-on contract with a higher bid and a corresponding higher profitability. If this strategy is followed, the firm faces two difficult problems: 1. How does one determine the probability of winning the follow-on contract? Bidding for Follow-On Contracts / 35