Construction bid price evaluation

Abstract

To overcome the disadvantages of the low bid price policy in open competitive contracts, many are advocating the average bid method for bid evaluation. However, as elucidated in this study, this method has some disadvantages. The purpose of this paper is to propose an alternate statistical procedure for bid evaluation. Such procedure applies simple statistical analysis to identify unrealistically low-priced bids, based on either the t-distribution or the normal distribution of a previously established database of similar bids. In this procedure, the ratio of a contractor's bid to owner cost estimate is used to eliminate the distorting effect of the project size. The unrealistically low-priced contracts are then excluded and the bid with the lowest price among the remaining bids is accepted. The procedure requires establishing a database of previous bids.Key words: bid evaluation, competitive bidding, contractor qualification, tender evaluation, contract administration, contract management, bid management.