A set covering model for optimizing selection of contract bidding in a strategic sourcing process: a case study of the Nigerian Airforce

Abstract

The sourcing decisions of contract bidding in a Military organization is complex to manage largely due to the increasing complexity of products requirements, multiple suppliers, and the nature of Air Force Hardware and Software installations pricing structures. This paper presents a set-covering model (formulation) that allows the user to select the most economical bid among offerors (contractors) that meet all the critical product requirements while minimizing the total cost. The optimization process is carried out in two phases. The first phase deals with the construction of a biddable combination matrix by mapping out the critical product requirements against the offerors’ (contractors) specifications. In the second phase, the model makes an optimal assignment of offerors to each feasible or contracting product by utilizing economies of scales offered by credible offerors volumes. This gives an optimization model for selecting the set of bid among multiple offerors’ proposals for installation services. The selection achieves the most favorable objective based on balancing the confidence performance level in past performance of the offerors and the cost to the Air Force. The research findings based on a realistic scenario demonstrate improvements in both overall performance and cost than the status quo.