Bidding Model Incorporating Bid Position for Determining Overhead-cum-markup Rate

Abstract

The direct cost of a construction project constitutes the majority of a contractor's bid, with the remaining part being its overhead cost and markup. Contractors often apply a combined rate of overhead and markup on top of the direct cost for producing a bid. Extending previous researches on overhead rate estimation and bid markup determination, this research aims to develop an improved bidding model incorporating the bid position for determining the minimum overhead-cum-markup rate so as to prevent an inadequate bid. Since factors influencing the overhead rate level may also influence the markup level, it is suggested to build a regression equation from actual bid data for estimating the overhead-cum-markup rate in the winning bid that is used to estimate the probability of winning for a bid. With assessments of probabilities of winning and those of making a loss for various bid levels, fuzzy inference systems that incorporate the bidder's positions in the fuzzy rules regarding the need for work and attitude toward risk are proposed. The model is illustrated using an example involving 406 projects. The suggested bids from the model for two cases of bidding are compared with those from other methods and the actual bids to examine its soundness. The results show that the model can differentiate the bid positions under varying scenarios and suggest minimum bids consistently.