<abstract xmlns="http://www.w3.org/1999/xhtml">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.</abstract>

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.

Modelling contractor’s bidding decision

Faculty of Civil Engineering and Architecture, Department of Construction Methods and Management

Faculty of Civil Engineering and Architecture, Dpt. of Construction Methods and Management

Engineering Management in Production and Services

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Modelling contractor\u2019s bidding decision"}

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)...

Modelling contractor’s bidding decision

Published Online: Mar 04, 2017

Page range: 64 - 73

Received: Sep 01, 2016

Accepted: Jan 20, 2017

DOI: https://doi.org/10.1515/emj-2017-0007

Keywords
decision support, decision to bid, pricing strategy, contractor cash flows, linear programming

© 2017 Sławomir Biruk et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Modelling contractor’s bidding decision

Published Online: Mar 04, 2017

Page range: 64 - 73

Received: Sep 01, 2016

Accepted: Jan 20, 2017

DOI: https://doi.org/10.1515/emj-2017-0007

Keywordsdecision support, decision to bid, pricing strategy, contractor cash flows, linear programming

© 2017 Sławomir Biruk et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
decision support, decision to bid, pricing strategy, contractor cash flows, linear programming