Assignment:
The U.S. Army Corps of Engineers issues purchase instructions informing potential suppliers that roadway graders will be evaluated using the following life cycle cost model:
LCC = unit operating cost, dollars = (unit price + logistic cost) / service life
The instructions require that the selected equipment supplier demonstrates service life in a post- award reliability acceptance test. If the reliability test does not meet the level guaranteed by the contract, then a penalty function deducts from the unit price as
Penalty cost = (1- test value MTBF/quoted MTBF) * (unit price + logistic cost), where MTBF = mean time between failures, service life, hours
Logistic cost = value supplied by U.S. Army Corps of Engineers, dollars
The following bids are received:
Supplier Unit Price MTBF, Hr
A $30,000 1000
B 35,000 1200
C 60,000 1635
The buyer determines that the logistic cost is $25,000 and supplies this information to qualified suppliers. Find the winning supplier for the road equipment. Now suppose that the supplier fails to meet the quoted MTBF by 10%. What is the penalty cost and the final price for the roadway grader?
Provide complete and step by step solution for the question and show calculations and use formulas.