Construction Bidding Research Articles

Correlating Bid Price with the Number of Bidders and Final Construction Cost of Public Street Projects

The vast majority of highway and street projects in the United States are procured by state or local governments through a competitive bidding process. In a competitively bid public project, awarding the contract to the lowest bidder is a predominant practice. A few studies measured the effect of awarding the contract to the lowest bidder on construction cost growth. This paper analyzes a sample of 435 bids on 113 public street projects in Clark County, Nevada, to determine a correlation between a lowest bid price and construction cost growth. The sample included projects completed between 1991 and 2008 and more than $554 million in construction value. The study also determined a correlation between the number of bidders and the deviation of the bid cost from the engineers’ estimate. The study showed no correlation between the lowest bid price and the construction cost growth. It showed that public owners would have received the lowest construction bid price if more bidders had been involved in the bidding process. The study found a strong correlation between the lowest bid price and the final construction cost. Therefore, a regression model was developed to predict the final construction cost of a street project by using the lowest bid price. A validation of the model showed that on average the predicted cost of a project was within 3.51% of the actual construction cost. Other findings included recommendations for future study.

Optimal Strategy Modeling for Price-Time Biparameter Construction Bidding

In the price-time biparameter construction bidding system, each contractor submits a bid price and construction time to complete the project, which are then aggregated to a total combined bid (TCB) by the client, and the contractor with the lowest TCB is awarded the project. Since bid price can be set as construction cost plus an appropriate markup and construction cost usually depends on construction time, TCB can be expressed as a function of time. By minimizing such a TCB function, the optimal construction time can be obtained, from which the optimal construction cost and bid price and hence the optimal price-time bidding strategy can be sequentially decided. While examining the whole optimal bidding process, this paper focuses on three aspects to enhance the key ideas: discussing the properties of the general and the quadratic time-cost functions, deducing the optimal bidding formulas with quadratic time-cost relationship, and illustrating the procedures for estimating the quadratic time-cost function using a few experience data and the linear regression method. The in-depth examination of the price-time biparameter bidding model in the paper can suggest ideas and methodologies to construction bidding or contractor selection with more criteria.

An improved fuzzy neural network based on T–S model

An improved fuzzy neural network based on Takagi–Sugeno (T–S) model is proposed in this paper. According to characteristics of samples spatial distribution the number of linguistic values of every input and the means and deviations of corresponding membership functions are determined. So the reasonable fuzzy space partition is got. Further a subtractive clustering algorithm is used to derive cluster centers from samples. With the parameters of linguistic values the cluster centers are fuzzified to get a more concise rule set with importance for every rule. Thus redundant rules in the fuzzy space are deleted. Then antecedent parts of all rules determine how a fuzzification layer and an inference layer connect. Next, weights of the defuzzification layer are initialized by a least square algorithm. After the network is built, a hybrid method combining a gradient descent algorithm and a least square algorithm is applied to tune the parameters in it. Simultaneous, an adaptive learning rate which is identified from input-state stability theory is adopted to insure stability of the network. The improved T–S fuzzy neural network (ITSFNN) has a compact structure, high training speed, good simulation precision, and generalization ability. To evaluate the performance of the ITSFNN, we experiment with two nonlinear examples. A comparative analysis reveals the proposed T–S fuzzy neural network exhibits a higher accuracy and better generalization ability than ordinary T–S fuzzy neural network. Finally, it is applied to predict markup percent of the construction bidding system and has a better prediction capability in comparison to some previous models.

Testing Vickery’s Revenue Equivalence Theory in Construction Auctions

Construction work is often allocated to contractors via first price sealed bid auctions (FPA). American Nobel Prize winner and economist William Vickery, however, suggested that second price auctions (SPA) (i.e., the lowest bidder wins the contract at the second lowest price) may be more beneficial due to the revenue equivalence theory (RET). This implies that, upon certain conditions being met, clients can, in the long run, expect to pay approximately the same to contractors irrespective of whether contracts are awarded according to an FPA or SPA. At the same time, it is expected to be easier to bid in an SPA. In the absence of real world data, the likely effects of using SPA for construction were examined experimentally. This involved experienced respondents bidding on over 60 identical FPA and SPA. Contrary to expectations, the bids for the SPA were significantly higher, indicating that RET is unlikely to occur in practice in construction bidding.

A challenge to the Acoustical Society of America and its members to help accelerate adoption of the American National Standards Institute (ANSI) standard for classroom acoustics

The ANSI Standard on classroom acoustics, S12.60-2002, has the potential to greatly improve the quality and accessibility of public education. To realize its potential the standard must be put to use. The standard is now voluntary unless it is adopted by a state or school district or is incorporated into individual school construction bidding documents. In some parts of the US, the ANSI standard now gets consideration for construction of new or substantially upgraded schools. But wide scale adoption may take many years at the current rate of progress. To accelerate adoption of the ANSI standard in school construction a major effort is required to educate stakeholders. ASA and its members can play an important role in this endeavor by educating stakeholders, including architects, school building officials, and parent–teacher groups through workshops, seminars and other presentations. Consistent with ASA’s mission, to increase and diffuse the knowledge of acoustics and promote its practical application, ASA and its members can become ambassadors for good classroom acoustics in our communities. Some of the existing materials are described that can be used for this vital objective to help remove acoustical barriers to learning.

Evaluating web-based bidding in construction: using simulation as an evaluation tool

E-business approaches have the potential to reduce costs of operations, speed up the business process and affect industries as a whole. However, the construction industry has not paid as much attention to using e-business approaches. Part of the reason behind this lack of interest is the substantial investments required in information technology (IT) to enable e-business processes and the lack of evidence that this type of investment pays off. This paper reviews methods to evaluate IT investments in the construction industry, summarising and discussing their limitations. A case study is presented, describing how simulation is used to compare the impact of the web-based bidding tool (WBBT) with respect to a traditional approach to bidding. The results emerging from this study suggests further study in the evaluation of e-business approaches in the construction industry.

A decision support tool for construction bidding

A decision support tool for construction bidding

A decision support tool for construction bidding

A reliable estimate of markup is essential for successful bid proposals. This paper presents a decision support model for construction bidding. The developed model can assist contractors in estimating markup, and owners and/or their agents in evaluating bid proposals. The model is generic and can be used as a tool to evaluate different alternatives in engineering, procurement, and construction. It utilizes the multi‐attribute utility theory and the analytic hierarchy process and makes use of their advantages. Unlike models developed for similar purposes, the proposed model provides a decision support environment for the two functions; that is, estimating markup and evaluating bids. It also enables the user to construct the decision hierarchy that best suits his/her company’s business environment and bidding strategy in a flexible manner. It accounts for the decision maker’s attitude towards risk. Two numerical examples are presented to demonstrate the use and capabilities of the proposed model.

A theoretical framework for determining the minimum number of bidders in construction bidding competitions

A theoretical framework is proposed for determining the minimum number of bidders in competition for projects in the construction industry. This is based on the neo-classical micro-economic theory for price determination in construction and the assumption of random contractor-selection. Empirical analysis of the Hong Kong data set not only illustrates the applicability of the framework, but also supports the relevance of the microeconomic model for construction price determination. The main implication for clients is that, in order to obtain the most competitive bids for projects in the most cost-efficient way, they should vary the minimum number of bidders in competition according to market conditions.

Solving A Harbour Sedimentation Problem In Yemen

The Ash Shihr, Yemen harbour on the Gulf of Aden was built in 1992193 by Nexen Inc. for the vessel fleet supporting the loading of oil into large tankers at the offshore Single Buoy Mooring (SBM). In designing the harbour, the greatest emphasis was placed on ensuring that the harbour provided effective shelter during the SW summer monsoon season, which can generate deep water waves of up to about 6.4 m significant wave height with a period of 14 seconds. This led to the harbour entrance being placed on the east side of the harbour to minimize wave agitation within the harbour. The dominant factor proved to be the littoral drift of sediment in a westerly direction. This led to the migration of large amounts of sediment into the harbour and the build up of sand on the beach well to the east of the harbour. As this situation developed it was effectively closing the harbour. A sedimentation study of the harbour was performed by Delft Hydraulics [l]. Various solutions were considered including by-pass maintenance dredging, a dredged sand trap, relocating the harbour entrance, and shielding the harbour with a sand trap breakwater. Westmar Consultants Inc. provided the detailed design for a 600 metre long sand trap breakwater which resulted in economically viable construction bids. The work was successfully completed by Yemen based contractors in May 2001. The quality of the work is excellent and the breakwater is performing as designed in trapping sand and preventing the longshore drift from accreting in the entrance. Transactions on the Built Environment vol 58 © 2001 WIT Press, www.witpress.com, ISSN 1743-3509

Multicriteria support for construction bidding

While profit maximization is one important objective in this decision domain, other objectives are important as well. This paper discusses multiple criteria and their respective objectives in construction bidding, and presents a bidding framework which recommends a pairwise comparison procedure to generate criterion weights and a linear transformation procedure to calculate relative scores for bidding alternatives. This hybrid multicriteria method is illustrated and evaluated using a set of past construction bids. The proposed bidding system is found to yield substantially improved solutions when work volume is highly important relative to expected profit. The corresponding decrease in the profit function is identified, allowing evaluation of expected profit foregone, in order that improved multiattribute functions might be attained.

Bid cutting: an empirical study of practice in South-East Queensland

The nature, status and role of bid cutting in construction bidding are examined from economic, legal, ethical and management perspectives. Some possible means of countering its negative effects are considered including its prohibition by legislation, the use of bid depositories, earlier formalisation of subcontracts, withdrawal of subcontract prices and through alternative procurement methods. An empirical survey of bid cutting practice is described involving a sample of main contractors (MCs) and subcontractors (SCs) in SouthEast Queensland. The practice of bid cutting was found to be widespread. All the MCs considered the practice to be ethical and all the SCs considered it to be unethical. In some cases, MCs awarded contracts elsewhere, even after telling SCs they had the job. Most of the SCs had tried individually to counteract bid cutting but were unable to continue this while others were complying with MC bid cutting attempts. SC bid withdrawals are very rare and litigation is never applied by either MCs or SCs. Mainly as a result of incomplete project documentation, MCs disliked the idea of making the subcontract binding at the time of main contract bid subject to its success, although it was generally recognised that it would reduce bid-cutting by the MC – view that was also shared by half the SCs. Most respondents thought the construction management procurement option might reduce bid cutting but none had sufficient direct experience to be sure.

Bid cutting: an empirical study of practice in South‐East Queensland

The nature, status and role of bid cutting in construction bidding are examined from economic, legal, ethical and management perspectives. Some possible means of countering its negative effects are considered including prohibition by legislation, the use of bid depositories, earlier formalization of subcontracts, withdrawal of subcontract prices and through alternative procurement methods. An empirical survey of bid cutting practice is described involving a sample of main contractors (MCs) and subcontractors (SCs) in Southeast Queensland. The practice of bid cutting was found to be widespread. All the MCs considered the practice to be ethical and all the SCs considered it to be unethical. In some cases, MCs awarded contracts elsewhere, even after telling SCs they had the job. Most of the SCs had tried individually to counteract bid cutting but were unable to continue this while others were complying with MC bid cutting attempts. SC bid withdrawals are very rare and litigation is never applied by either MCs or SCs. Mainly as a result of incomplete project documentation, MCs disliked the idea of making the subcontract binding at the time of main contract bid subject to its success, although it was generally recognized that it would reduce bid cutting by the MC‐a view that was also shared by half the SCs. Most respondents thought the construction management procurement option might reduce bid cutting but none had sufficient direct experience to be sure.

Construction bid price evaluation

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.

Construction bid price evaluation

Construction bid price evaluation

Bidding strategies for conventional and trenchless technologies considering social costs

With recent rapid advances in trenchless technologies, acceptance of such methods for inspection, repair, upgrade, and installation of underground infrastructure systems has been increasing. Trenchless technology has greatly reduced the footprint of the construction site and the need for much of the trenching that is normally associated with underground construction. The reduction of the construction footprint and the amount of trenching has greatly impacted a class of costs called social costs. Social costs can be considered the costs of a construction project which are not carried in the construction bid such as traffic delays, reinstatement of public and private property, and public perception. Social costs are not clearly defined, nor is their estimation straightforward. What is the actual cost for replacing a lawn damaged through trenching or the political cost for closing a main thoroughfare close to an election? Inclusion of social costs with project costs can greatly impact the normal tendering process. Inclusion of social costs allows the municipality to estimate the true costs of the project and therefore identify the most economically efficient bid based on minimizing the total cost. From the taxpayers point of view the inclusion of at least a subset of the social costs in the selection process is desirable. However, from the point of view of a competitive bidder, inclusion of costs not under their control (social costs) in the selection process makes the determination of the optimal bid difficult for a contractor. This paper discusses traditional bidding strategies in which the bidder can optimize the bid based on a probabilistic approach using the expected-value approach to bidding under the assumption that the low-bid method is used. This paper also puts forward two methods for the estimation of social costs which can be used in conjunction with the bidding methodology discused. A worked example demonstrates the application of one of the estimation methods and the bidding methodology.(A)

Price stability and the business cycle: UK construction bidding patterns 1970-91

Problems of competitive pricing and strategic management in the construction industry are discussed. A statistical analysis of tender spread patterns over the period 1970–91 shows that changing market conditions influence levels of risk exposure and in turn affect the establishment of a market-generated ‘going rate’ for construction. A pattern of increasing stability of pricing is identified during the 1980s, and this pattern is linked to developments in the strategic management of contracting organizations. Despite trenchant criticism of the sealed bid as a method of price determination, the industry's price levels do respond relatively quickly to changed economic conditions.

ARTIFICIAL NEURAL NETWORKS FOR CONSTRUCTION BID DECISIONS

Abstract An Artificial Neural Network (ANN) approach was explored for supporting construction bid decisions, since such decisions are heavily dependent on practitioner expertise, which in turn is generally encapsulated in case histories. One of the ANNs described here was trained on knowledge from a sample of the entire Sri Lankan construction industry, and was used to predict the preferred job sizes for firms of differing characteristics; such information could help firms in their bid/no-bid decisions. The other ANN was trained on case histories elicited from a single contractor, and was used to predict the percentage mark-up. The network outputs were obtained in both binary output and continuous valued output formats. The former format had some distinct advantages over the latter, as it provided greater information for decision making instead of being a “black box” output. The influences of the middle layer size, output format and allowable error during training, on the training duration and accuracy of...

Closure to “DBID: Analogy‐Based DSS for Bidding in Construction” by Osama Moselhi, Tarek Hegazy, and Paul Fazio (September, 1993, Vol. 119, No. 3)

Closure to “DBID: Analogy‐Based DSS for Bidding in Construction” by Osama Moselhi, Tarek Hegazy, and Paul Fazio (September, 1993, Vol. 119, No. 3)

Discussion of “DBID: Analogy‐Based DSS for Bidding in Construction” by Osama Moselhi, Tarek Hegazy, and Paul Fazio (September, 1993, Vol. 119, No. 3)

Discussion of “DBID: Analogy‐Based DSS for Bidding in Construction” by Osama Moselhi, Tarek Hegazy, and Paul Fazio (September, 1993, Vol. 119, No. 3)