Modelling Contractor's Bidding Decision

• Autorzy: Sławomir Biruk , Piotr Jaśkowski , Agata Czarnigowska
• Języki publikacji: EN

Abstrakty

EN

The authors aim to provide a set of tools to facilitate the main stages of the competitive bidding process for construction contractors. These involve 1) deciding whether to bid, 2) calculating the total price, and 3) breaking down the total price into the items of the bill of quantities or the schedule of payments to optimise contractor cash flows. To define factors that affect the decision to bid, the authors rely upon literature on the subject and put forward that multi-criteria methods are applied to calculate a single measure of contract attractiveness (utility value). An attractive contract implies that the contractor is likely to offer a lower price to increase chances of winning the competition. The total bid price is thus to be interpolated between the lowest acceptable and the highest justifiable price based on the contract attractiveness. With the total bid price established, the next step is to split it between the items of the schedule of payments. A linear programming model is proposed for this purpose. The application of the models is illustrated with a numerical example. The model produces an economically justified bid price together with its breakdown, maintaining the logical proportion between unit prices of particular items of the schedule of payment. Contrary to most methods presented in the literature, the method does not focus on the trade-off between probability of winning and the price but is solely devoted to defining the most reasonable price under project-specific circumstances. The approach proposed in the paper promotes a systematic approach to real-life bidding problems. It integrates practices observed in operation of construction enterprises and uses directly available input. It may facilitate establishing the contractor's in-house procedures and managerial decision support systems for the pricing process. (original abstract)

Słowa kluczowe

EN

Tenders; Tender procedures; Theory of decision support; Services offer; Pricing strategies; Construction services; Linear programming

PL

Przetargi; Procedury przetargowe; Teoria wspomagania decyzji; Oferta usługowa; Strategia cen; Usługi budowlane; Programowanie liniowe

• Czasopismo: Engineering Management in Production and Services
• Rocznik: 2017
• Numer: nr 1
• Strony: 64--73

Twórcy

autor

Sławomir Biruk

• Lublin University of Technology, Poland

autor

Piotr Jaśkowski

• Lublin University of Technology, Poland

autor

Agata Czarnigowska

• Lublin University of Technology, Poland

Bibliografia

• Ahmad, I., & Minkarah, I. (1988). Questionnaire survey on bidding in construction. Journal of Management in Engineering, 4(3), 229-243. doi:10.1061/(ASCE)9742-597X(1988)4:3(229)
• Bageis, S., & Fortune, C. (2009). Factors affecting the bid/ no bid decision in the Saudi Arabian construction contractors. Construction Management and Economics, 27, 53-71. doi: 10.1080/01446190802596220
• Benjamin, N.B.H., & Meador, R.C. (1979). Comparison of Friedman and Gates competitive bidding models. ASCE Journal of the Construction Division, 105(1), 25-40.
• Best, R.J. (1997). Market-Based Management Strategies for growing customer value and profitability. New Jersey, USA: Prentice Hall.
• Brook, M. (2011). Estimating and Tendering for Construction Work. 4th Ed. Abingdon, Great Britain: Spon Press.
• Carr, R.I. (1982). General Bidding Model. Journal of the Construction Division, 108(4), 639-650.
• Cartlidge, D. (2013). Estimator's Pocket Book. Abingdon, Great Britain: Routledge.
• Chua, D., & Li, D. (2000). Key Factors in Bid Reasoning Model. Journal of Construction Engineering and Management, 126(5), 349-357. doi:10.1061/(ASCE)0733-9364(2000)126:5(349)
• Cooper, R., & Slagmulder, R. (1997). Target Costing and Value Engineering. Portland-New Jersey, USA: Productivity Press.
• Egemen, M., & Mohamed, A.N. (2008). SCBMD: A knowledge-based system software for strategically correct bid/no bid and mark-up size decisions. Automation in Construction, 17(7), 864-872. doi: 10.1016/j.aut-con.2008.02.013
• Friedman, L. (1956). A competitive bidding strategy. Operations Research, 4, 104-112.
• Gates, M. (1967). Bidding strategies and probabilities. ASCE Journal of the Construction Division, 93(CO1), 75-107.
• Hassanein, A.G. (1996). Factors affecting the bidding behaviour of contractors in Egypt. Building Research and Information, 24(4), 228-236. doi: 10.1080/09613219608727534
• Hwang, J-S., & Kim, Y-S. (2016). A bid decision-making model in the initial bidding phase for overseas construction projects. KSCE Journal of Civil Engineering, 20(4), 1189-1200. doi:10.1007/s12205-015-0760-y
• Ioannou, P.G. (1988). Bidding models - symmetry and state of information. Journal of Construction Engineering and Management, 114(2), 214-232. doi: 10.1061/(ASCE)0733-9364(1988)114:2(214)
• Kaka, A., Wong, C., Fortune, C., & Langford, D. (2008). Culture change through the use of appropriate pricing systems. Engineering, Construction and Architectural Management, 15(1), 66-77. doi: 10.1108/096999 80810842070
• Köksalan, M.M., Wallenius, J., & Zionts, S. (2011). Multiple Criteria Decision Making: From Early History to the 21st Century. Singapore: World Scientific.
• Kou, G., Ergu, D., Peng, Y., & Shi, Y. (2013). Data processing for the AHP/ANP. Series: Quantitative Management, Vol. 1, Berlin, Germany: Springer.
• Leśniak, A., & Plebankiewicz, E. (2013). Overhead costs and profit calculation by Polish contractors. Technological and Economic Development of Economy, 19(1), 141-161. doi:10.3846/20294913.2012.763008
• Leśniak, A., & Plebankiewicz, E. (2015). Modeling the Decision-Making Process Concerning Participation in Construction Bidding. Journal of Management in Engineering, 31(2). doi: 10.1061/(ASCE)ME.1943-5479.0000237
• Li, H., & Love, P.E.D. (1999). Combining rule-based expert systems and artificial neural networks for mark-up estimation. Construction Management and Economics, 17, 169-76. doi: 10.1080/014461999371664
• Lin, C-T., & Chen, Y-T. (2004). Bid/no-bid decision-making - a fuzzy linguistic approach. International Journal of Project Management, 22(7), 585-593. doi: 10.1016/j.ijproman.2004.01.005
• Lowe, D.J., & Parvar, J. (2004). A logistic regression approach to modelling the contractor's decision to bid. Construction Management and Economics, 22(6), 643-653. doi: 10.1080/01446190310001649056
• Mielec, A., Jaśkowski, P., & Biruk, S. (2009). Ustalenie wskaźnika narzutu zysku w strategii przetargowej przedsiębiorstwa budowlanego [Determining profit margins in bidding strategy of a construction enterprise]. Przegląd Budowlany, 6, 50-53.
• Mochtar, K., & Arditi, D. (2000) Alternate pricing strategies in construction. Civil Engineering Dimension, 2(1), 56-64.
• Moselhi, O., Hegazy, T., & Fazio, P. (1993). DBID: Analogy-based DSS for bidding in construction, Journal of Construction Engineering and Management, 119(3), 466-470. doi: 10.1061/(ASCE)0733-9364(1993)119:3(466)
• Potts, K. (2008). Construction Cost Management: Learning from Case Studies. Abingdon, Great Bitain: Taylor & Francis.
• Saaty, T.L. (2000). Fundamentals of Decision Making and Priority Theory With the Analytic Hierarchy Process. Pittsburgh, PA: RWS Publications.
• Shash, A.A. (1993). Factors considered in tendering decisions by top UK contractors. Construction Management and Economics, 11(2), 111-118. doi: 10.1080/01446199300000004.
• Shokri-Ghasabeh, M., & Chileshe, N. (2016). Critical factors influencing the bid/no bid decision in the Australian construction industry. Construction Innovation, 2(16), 127-157. doi:10.1108/CI-04-2015-0021
• Sobotka, A., & Czarnigowska, A. (2007). Target costing in public construction projects. Proceedings of the 9th International Conference Modern Building Materials, Structures and Techniques, 16-18 May, Vilnius, Lithuania. Retrieved from: http://leidykla.vgtu.lt/conferences/MBM_2007/2pdf/Sobotka_czarn.pdf
• Stevens, M. (2012). The Construction MBA. Practical Approaches to Construction Contracting. New York, USA: McGraw-Hill.
• Tan, Y.-T., Shen, L.-Y., Langston, C., & Liu, Y. (2010). Construction project selection using fuzzy TOPSIS approach. Journal of Modelling in Management, 5(3), 302-315. doi: 10.1108/17465661011092669
• Triantaphyllou, E. (2000). Multi-criteria Decision Making Methods: A Comparative Study. Boston, USA: Kluwer.
• Wang, W.-C., Dzeng, R.-J., & Lu, Y.-H. (2007), Integration of Simulation-Based Cost Model and Multi-Criteria Evaluation Model for Bid Price Decisions. Computer-Aided Civil and Infrastructure Engineering, 22, 223-235. doi:10.1111/j.1467-8667.2007.00480.x
• Wanous, M., Boussabaine, A.H., & Lewis, J. (2000). To bid or not to bid: a parametric solution. Construction Management and Economics, 18(4), 457-466. doi: 10.1080/01446190050024879
• Wanous, M., Boussabaine, A.H., & Lewis, J. (2003). A neural network bid/no bid model: the case for contractors in Syria. Construction Management and Economics, 21(7), 737-744. doi: 10.1080/0144619032000093323

Identyfikatory

DOI

10.1515/jem-2017-0007