Construction Game Project
December 6, 2012
Introduction What a better way to end the year in CEE 201 with a construction project that deals with bidding. Our studies throughout the year have been focused upon engineering economics transitioning into linear programming models in order for engineers to make educated decisions in real life situations. In order to supplement this thought process, the construction game was created that deals with placing bids, ordering labor, and hiring workers to make a year’s end profit. This game is structured around placing bids against other teams within the class for three rounds over three years. If the bid is won for your team, your company completes the project and the profit is later computed. As with every reasonable game, there are rules to be followed. Each team has secured a capital of ten million dollars total for the three fiscal years. Before bids are placed, your company must purchase all the concrete and labor that will be required throughout the year. Unused money will increase by four percent each year in the stock market while additional funds beyond the ten million venture of capital funding will be secured via a loan with a ten percent annual interest rate. With purchasing concrete and construction workers, there are constraints to find certain values. Each construction worker will work up to two thousand hours per year and receive an annual salary of fifty thousand dollars. Unions demand that hired workers are paid whether they are actually put to work or not and the unions have agreed that workers may divide their hours of labor between multiple projects. Each cubic yard of concrete costs one hundred dollars and includes cost of purchase and transportation. Unused labor does not carry over into the following year, but concrete does. Unused concrete can be salvaged for ten dollars per cubic yard at the end of year three. Unused labor will be sold to a temporary agency for fifteen dollars an hour to be paid to our team. With these constraints on both decision variables, the final price of the winning bid will be determined by the lowest bid. Ties are given to the team with the lowest number of bids for that year. If the tie breaker fails, the winning bid will be chosen at random. There is also a cost of thirty dollars an hour to hire workers for insufficient numbers not purchased for in order to complete a project. Along with insufficient workers comes a price of two hundred dollars per cubic yard of insufficient concrete needed to complete a project. Finally, if there is insufficient money to cover these costs, a loan will be automatically obtained at ten percent annual interest. At the end of the year, profits are used to settle loans.
Strategy The first Year, we assumed that we would win ½ of our bids. Therefore, we bought enough laborers to cover ½ of the minimum hours of labor for all the projects we bid on. We also took the minimum number hours of labor because the unused labor could only be sold back at 60% ($15/hr versus $25/hr) and extra labor cost only an extra 20% ($30/hr versus $25/hr). In addition, we purchased enough concrete to cover ½ of the maximum tons of concrete. Similarly, we took ½ of the maximum concrete since we expected to win ½ of our bids. The reason we selected the maximum tons of concrete was their ability to be held over the next year. We tried bidding on as many projects as our budget allowed us without taking on a loan. Our project selection was determined by a random number generator on Excel. We decided to do random projects because any other strategy we could use for selecting the projects might be used by another group and would therefore increase competition for profit on those projects. The bids for all the projects were 1.08 times the cost of the project. The cost for each project we defined as the cost of the average hours of labor plus the cost of the average tons of concrete of that project. In the end...