Abstract
With the goal to achieve efficiency in bidding competitions, many codes of bidding procedure recommend clients provide contractors with bidding feedback information. Contractors strive to bid competitively via learning based on their experiences in past bidding attempts. The level of bidding feedback information, however, varies across clients. In many cases, clients do not provide feedback or provide insufficient feedback to contractors. Focussing on two information feedback conditions (full and partial), we examine: (i) the changes in bidding trend over time, and (ii) the effects of bidding feedback information on bidders’ competitiveness in bidding. Data were gathered using a bidding experiment that involved student (inexperienced) bidders with a construction project management background. The results show that the variations in bids over time for full information feedback condition are statistically significant, but not for bids from bidders with partial bidding feedback information. Bidders with full bidding feedback information are more competitive than those with partial bidding feedback information. The findings add to both our theoretical and empirical understanding of construction bidding: an understanding of the process of changes in the price of building work, and how the process can be manipulated through the release of bidding feedback information.
Highlights
Construction clients’ objective of awarding a contract is to agree upon a contract type and price that produces reasonable risk and maximises the incentive for efficient and economic performance of a contractor (Kerzner 2006)
Clients do not provide feedback or provide insufficient feedback to contractors (Drew and Fellows 1996). Their survey respondents indicated that they obtain bidding data from a variety of sources, including: competitors, subcontractors, friendly acquaintances, suppliers and newspapers, little is known about the effects of varying levels of bidding feedback information on construction bid prices
This research examines the effects of information feedback conditions in construction bidding through an experimental setting, where two groups of inexperienced bidders were supplied with full and partial bidding feedback information, respectively
Summary
Construction clients’ objective of awarding a contract is to agree upon a contract type and price that produces reasonable risk and maximises the incentive for efficient and economic performance of a contractor (Kerzner 2006). Varying information feedback conditions have been shown to affect a bidder's competitiveness to different degrees in sealed-bid auctions, whereby affecting the revenues for those accepting bids to Australasian Journal of Construction Economics and Building buy or accepting offers to sell (e.g. Issac and Walker 1985; Dufwenberg and Gneezy 2002; Engelbrecht-Wiggans and Katok 2008). Clients do not provide feedback or provide insufficient feedback to contractors (Drew and Fellows 1996) Their survey respondents indicated that they obtain bidding data from a variety of sources, including: competitors, subcontractors, friendly acquaintances, suppliers and newspapers, little is known about the effects of varying levels of bidding feedback information on construction bid prices. The study provides an insight into changes in the price of building work associated with the release of bidding feedback information
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