Unbalanced Bidding Research Articles

An Owner’s Overview of Contractor’s Models for Unbalanced Bidding: Easing the Controversy over This Practice

An Owner’s Overview of Contractor’s Models for Unbalanced Bidding: Easing the Controversy over This Practice

An advanced decision-support system for ranking unbalanced bids

Awarding a contract to a bidder who has unbalanced the bid may cost more money to the owner. An owner who determines that a bid has been unbalanced has the legal right to reject the bid. Although several models have been developed to detect unbalanced bids, some researchers still assert that the number of cases in which owners mistakenly identify balanced bids as unbalanced is too great to ignore. One of the reasons of this failure is the use of an inappropriate benchmark against which the offered unit prices are compared. In this paper it is argued that the use of the geometric mean of the unit prices provided by the bidders as a benchmark helps to obtain robust solutions and an advanced decision-making model is proposed in which the Information Entropy and VIKOR methods are used to detect unbalanced bids. The results obtained from an example project drawn from the literature demonstrate how owners may be misled if they use an inappropriate benchmark in detecting unbalanced bids. This study contributes to the body of knowledge by highlighting the negative impacts of using flawed benchmarks in this process, an area of research that is mostly ignored in the unbalanced bidding literature.

A Legitimate Alternative for Unbalanced Bidding in Unit Price Contracts

A Legitimate Alternative for Unbalanced Bidding in Unit Price Contracts

Data-Driven Analysis of Construction Bidding Stage–Related Causes of Disputes

Construction bidding is a complex process that involves several potential risks and uncertainties for all the stakeholders involved. Such complexities, risks, and uncertainties, if uncontrolled, can lead to the rise of claims, conflicts, and disputes during the course of a project. Even though a substantial amount of knowledge has been acquired about construction disputes and their causation, there is a lack of research that examines the causes of disputes associated with the bidding phase of projects. This study addresses this knowledge gap within the context of infrastructure projects. In investigating and analyzing the causation of disputes related to the bidding stage, the authors implemented a multistep research methodology that incorporated data collection, network analysis (NA), spectral clustering, and association rule analysis (ARA). Based on a manual content analysis of 94 legal cases, the authors identified a comprehensive list of 27 causes of disputes associated with the bidding stage of infrastructure projects. The NA results indicated that the major common causes leading to disputes in infrastructure projects comprise inaccurate cost estimates, inappropriate tender documents, nonproper or untimely notification of errors in a submitted bid, nonproper or untimely notification of errors in tender documents, and noncompliance with Request for Proposals’ (RFP) requirements. Upon categorizing and clustering the causes of disputes, the ARA results revealed that the most critical associations are related to differing site conditions, errors in submitted bids, unbalanced bidding, errors in cost estimates, and errors in tender documents. This study promotes an in-depth understanding of the causes of disputes associated with the bidding phase within the context of infrastructure projects, which should better enable the establishment of proactive plans and practices to control these causes as well as mitigate the occurrence of their associated disputes during project execution.

A Procedure for Rebalancing Unbalanced Bidding in Unit Price Contracts

Unbalanced pricing in unit price contracts aims at gaining additional benefits for the contractor who utilizes this strategy at the expense of the owner, or obtaining a competitive advantage over other competing bidders who submit balanced or less skewed bids. This paper presents the development of a procedure to prevent the negative impacts of unbalanced prices in submitted bids on the owner. The proposed procedure rebalances the submitted rates of all bidders based on the reasonable price for each item as determined by the bidders themselves. The basis for adjusting item rates is the pack price of each item and the bidder’s total submitted bid price. Applying the procedure eliminates the need for the challenging task of detecting unbalanced bids, as well as the need to reject such bids and re-advertise the project. The proposed method can handle various forms of bid unbalancing, including front loading, quantity error exploitation, as well as the imbalance associated with collusion schemes. The procedure’s robustness is demonstrated through two examples. The method is anticipated to provide the needed protection for owners against additional costs and financial risks associated with an imbalance in bids. Simultaneously, the method deters bidders from manipulating submitted bids and nurtures fair competition among bidders to win the contract.

Unbalanced bidding in construction projects: a contractors’ perspective

Published research on unbalanced bidding either shows the owners’ perspective or intends to represent the contractors’ views through theoretical models. This paper aims to reflect the contractors’ perspective on this topic through an empirical approach. 86 interviews with experienced contractors in the Jordanian construction field were held and their standpoints on unbalanced bidding were obtained and analyzed. The analysis reveals that front end loading and quantity error exploitation are the most widely used forms of unbalanced bidding. The main motives for adopting unbalanced pricing are found to be; increasing chances of winning bids; improving project’s profitability; and minimizing financing costs of projects. The surveyed contractors showed deep understanding of the risks associated with this practice on both the contractor and owner alike to the extent that the majority thereof surprisingly asked for explicit prohibition on this practice in bidding regulations. The paper provides some practical recommendations to that aim at limiting this practice. The outcomes of the paper should prove to be useful to owners in shaping policies regarding unbalanced pricing in bidding documents as well as understanding contractors’ motives to this practice. Although the survey was conducted in Jordan, the results obtained is expected to have much wider applicability, and recommendations obtained can be useful in many other countries.

A Model for Detection and Prevention of Unbalanced Bid in the Public Work Procurement Process in India

Indian Public procurement works contribute almost 30% of the total GDP, most of the large and massively funded projects are public-funded, utilizing the tax collected from the citizens of the country. Hence, any discrepancies associated with such projects have direct implications on the taxpayers. The public procurement process, due to legal bindings and ethics is prone to various malpractices, that affect the overall performance of the system. Hence, it becomes imperative to prevent anomalies associated with the public procurement process. One of the anomalies associated with public procurement is an Unbalanced bid, a method of redistributing the project cost such that it varies from the Engineer’s Estimate. The ethics related to Unbalanced bid varies, contractors state that unbalanced bidding is moral and find its application beneficial to the project performance while clients and officials opine that an unbalanced bid is an unethical practice to jeopardize project progress and client’s money. The unbalanced bid can be of four types – Quantity Error Exploitation, Front-loaded Bid, Back loaded Bid, and Collusive bid. The research intends to propose a model to detect and prevent unbalanced bids respecting the constraints of the public procurement process in India, enhancing project performance, and protecting tax payer’s money.

The framework of data-driven and multi-criteria decision-making for detecting unbalanced bidding

PurposeUnbalanced bidding can seriously imposed the government from obtaining the best value for the taxpayers' money in public procurement since it increases the owner's cost and decreases the fairness of the competitive bidding process. How to detect an unbalanced bid is a challenging task faced by theoretical researchers and practical actors. This study aims to develop an identification method of unbalanced bidding in the construction industry.Design/methodology/approachThe identification of unbalanced bidding is considered as a multi-criteria decision-making (MCDM) problem. A data-driven unit price database from the historical bidding document is built to present the reference unit prices as benchmarks. According to the proposed extended TOPSIS method, the data-driven unit price is chosen as the positive ideal solution, and the unit price that has the furthest absolute distance measure as the negative ideal solution. The concept of relative distance is introduced to measure the distances between positive and negative ideal solutions and each bidding unit price. The unbalanced bidding degree is ranked by means of relative distance.FindingsThe proposed model can be used for the quantitative evaluation of unbalanced bidding from a decision-making perspective. The identification process is developed according to the decision-making process. The finding shows that the model will support owners to efficiently and effectively identify unbalanced bidding in the bid evaluation stage.Originality/valueThe data-driven reference unit prices improve the accuracy of the benchmark to evaluate the unbalanced bidding. The extended TOPSIS model is applied to identify unbalanced bidding; the owners can undertake objective decision-making to identify and prevent unbalanced bidding at the stage of procurement.

Detection Model for Unbalanced Bidding in Railway Construction Projects: Considering the Risk of Quantity Variation

AbstractThe application of a unit-price contract is nascent in railway construction projects in China. The investment risks for owners arising from unbalanced bidding in unit-price contracts should...

Detecting unbalanced bidding to achieve economic sustainability using fuzzy logic approach

Purpose To achieve sustainability for a construction project requires the achievement of economic, environmental and social sustainability at the same time. The economic sustainability of a project should be built into the stipulated cost. The unbalanced bidding always contribute cost overrun for a construction project. The purpose of this paper is to develop a method for identifying unbalanced bidding. Design/methodology/approach The problem of identifying unbalanced bidding is a comprehensive evaluation problem. All line items and bidders in bills of quantities are evaluation factors and evaluation objects, respectively, and the engineer’s estimated prices are considered as the evaluation benchmarks. The weights of these factors are determined through integrating the entropy weight method and the analytic hierarchy model, which consider subjective and objective factors in the weighting process. Findings The proposed model can be used to quantitatively evaluate unbalanced bids. The identification process can be analyzed within a short period, specifically with the aid of Microsoft Excel, reducing delays in awarding contracts. The results show that the model will support owners as they efficiently and effectively identify unbalanced bids in the bid evaluation stage to mitigate the negative consequences of unbalanced bidding. Practical implications A case study is given to verify the feasibility and practicability of the proposed method, which not only assists owners in efficiently and effectively identifying unbalanced bidding, but also promotes the economic sustainability of construction projects. Originality/value The fuzzy comprehensive evaluation method is used to detect unbalanced bidding, allowing owners to be objective as they identify and reduce unbalanced bidding at the procurement stage.

Detecting unbalanced bids via an improved grading-based model

Abstract Unbalanced bidding, also known as skewed bidding, is the process of increasing and/or decreasing the prices of various bid items without altering the total offered bid price. Bids can be unbalanced either mathematically (front-end loading) or materially (quantity error exploitation). Owners should be very careful when evaluating the tenders as awarding a contract to an unbalanced bid may result in severe cost overruns because the prices of those items do not reflect their true costs and markup allocations. Unbalanced bidding is still a contentious issue in the construction industry. While some researchers consider it as a legal bidding strategy in such a fierce competitive business environment, others view it as an unethical practice and claim that unbalanced bids should be disqualified. Studies regarding unbalanced bidding can be categorized into two groups: (1) the ones focusing on detecting or preventing this practice to help owners; and 2) the ones focusing on optimizing unbalanced bidding to help contractors. This study aims to develop a model, which consists of eight grading systems, to assist owners in detecting materially unbalanced bids. The proposed model is the improved version of the previous model, which was composed of five grading systems. In order to demonstrate how this grading-based model can be used by owners, an illustrative example is presented. It was found that owners can easily and successfully detect unbalanced bids via the proposed model.

MULTI-CRITERIA DECISION MAKING FOR IDENTIFICATION OF UNBALANCED BIDDING

Unbalanced bidding is a serious problem in the competitive bidding practices of construction projects. Identification and prevention of unbalanced bidding is an important and complexity task for owners. This paper aims to propose an identification model of unbalanced bidding from multi-criteria decision making (MCDM) perspective. The VIKOR method is employed to detect unbalanced bidding, in which the line items and bidders are considered as criteria and alternatives in MCDM, respectively. And the engineer’s estimated price is chosen as evaluation benchmarking. Then relative distances between engineer’s estimated price and each bidding unit price are calculated to build decision matrix. The weights of factors are determined using entropy weight method. To illustrate the effectiveness of the proposed model, an application example is tested in detecting unbalanced bidding. Finally, the sensitivity analysis about VIKOR method is given. It shows that the presented model would provide a robust decision making support for owner in identifying unbalanced bidding.

A Grading System-based Model for Detecting Unbalanced Bids during the Tendering Process

Unbalanced bidding is a common practice used in both unit price and lump sum contracts. Contractors may unbalance their bids in different forms for various reasons. The studies in the literature either focus on developing optimization models that assist contractors in winning contracts and maximizing profits of their bids through unbalancing or developing models that assist owners in detecting and/or preventing unbalanced bids during the bid evaluation stage. Unbalanced bidding is one of the most controversial subjects in the construction management literature and practice. Although there is no consensus on whether it is unethical or not, this practice is not usually for the benefit of owners. Therefore, owners have the right to reject the unbalanced bids and create a fair competition environment if they have a mechanism to detect it during the bid evaluation process. The main objective of this study is to propose a model, which consists of five different grading systems and helps owners in detecting unbalanced bids during the tendering process. In the proposed model, owners may either calculate the individual grades of each bidder or calculate the final score of each bidder by assigning different weights to these grading systems according to the project characteristics or their own needs. The final scores and bid prices of the contractors can be simultaneously evaluated. In order to demonstrate the applicability of the proposed model, an illustrative example is presented. It can be concluded that the proposed model can be effectively and easily used by owners for detecting unbalanced bids. This paper is the revised version of the paper that has been published in the proceedings of the Creative Construction Conference 2018 (Polat et al., 2018).

Identification of unbalanced bids based on grey-fuzzy evaluation method

To provide theoretical reference for owners to identify unbalanced bids, this paper aims to construct an identification method based on grey relational and fuzzy set theory. Firstly, to measure the closeness degree between bidding unit price from engineering’s estimated price, grey relational analysis theory is used to express the relationship between them. Secondly, a combined weight method determining all line items is calculated through integrating analytic hierarchy model and maximizing deviation method. Thirdly, based on fuzzy set theory, the membership degree and the fuzzy relation matrix are constructed, and then a fuzzy comprehensive identification method is established to identify unbalanced bidding. Fourthly, on the basis of fuzzy comprehensive identification method, the scoring set and total score vector are designed, and the rank of unbalanced bids is obtained by total score vector. Finally, a practical construction project bidding is stated to illustrate the effectiveness and practicability of the proposed method.

Skew to win, not to profit – unbalanced bidding among informed bidders

PurposeSeveral sectors, especially the construction industry, use unit price contracting (UPC). This contracting form provides agents, ex ante, with estimated quantities of the work to be done. Competing agents then offer corresponding unit prices i.e. the bid is a price vectors, and most often the lowest vector sum is awarded the contract. This way of procuring is not only transparent but also entails a potential problem of unbalanced bidding. Unbalanced bidding occurs when an informed agent skews unit prices to win the ex ante bid. The concept is not new topic in research, but theoretical models from an economics perspective are not extensive.Design/methodology/approachThis paper will focus on how competition among informed bidders will affect the optimal solution.FindingsIt is shown that skewing is still a dominating strategy under competition. However, competition will decrease, but not necessarily eliminate, information rents.Originality/valueIn this setting, unbalanced bidding could mainly be seen as a way to win the contract and not to extract information rents. Thus, it would not constitute an efficiency problem for the client.

Identification and Prevention of Unbalanced Bids Using the Unascertained Model

AbstractUnbalanced bidding has presented a significant issue in the construction industry. The award of a contract to an unbalanced bid poses a significant threat to the construction cost, as well ...

Detection Tool for Unbalanced Bids

Unbalanced bidding is a cash flow management strategy that is recognized as an illegal/disqualifying practice by public owners; and unethical practice by most private owners. This practice provides the awarded bidder with unjustified advantages at the expense of the owner. Unfortunately, limited tools and techniques are currently available to identify and detect unbalanced bids during the evaluation process. This paper presents an innovative detection tool to identify unbalanced bids in unit price contracts during the bid evaluation process. The proposed technique develops BMDI graphs to visualize total markup variation patterns during the project lifetime to detect unbalanced bids. The proposed method also uses Monte Carlo simulation to take in consideration the impact of cost uncertainties and risks. An illustrative example was presented to show the capabilities and features of the proposed method in determining the status of submitted bids during the evaluation process.

Detection Model for Unbalanced Pricing in Construction Projects: A Risk-Based Approach

AbstractUnbalanced pricing of bid line items is considered an undesirable practice by owners and may lead to rejection of the bid on the basis of nonresponsiveness to the bidding regulations. This paper presents the development of a detection model to help owners detect objectionable unbalanced bidding. The proposed model quantifies the risk afforded by deviations of the actual quantities of work from the estimated quantities of the bid line items. The proposed model also considers the impact of multiple uncertainties in line item quantities on the owner’s total project cost based on the unit prices submitted by all the bidders for the project. Historical deviations from the estimated quantities during previous construction projects are used as an indicator of future fluctuations in the estimated quantities. The proposed model allows uncertainty in the quantities of work to be incorporated into the bid evaluation stage to assess each bidder’s likelihood of being the truly lowest bidder (i.e., yielding the...

The Controversy around Unbalanced Bidding in Construction: Seeking a Fair Balance

AbstractUnbalanced bidding continues to be a controversial issue in the literature as well as in actual competitive bidding practices. Although a considerable amount of the past research advocated unbalanced bidding and viewed it as a legitimate bidding strategy, public bidding regulations discourage this practice and may disqualify unbalanced bids as nonresponsive offers. In an attempt to ease the controversy and present for the first time a balanced perspective on unbalanced bidding, this paper examines the two conflicting perspectives and conducts a review of the literature reflecting the owners’ and the contractors’ perspectives and an analysis of the conflicting impacts of bid unbalancing on the owner and the contractor. The root causes of disagreement around this practice are discussed and criteria are suggested that draw a line between acceptable and unacceptable bid unbalancing. The proposed criteria seek equitable risk-sharing between owners and contractors and are expected to minimize the ambigu...

PREVENTING UNETHICAL AND ILLEGAL PRACTICES IN CONSTRUCTION

Despite the fact that all professional associations, including ASCE, CMAA, PMI, AACE, and NSPE have codes of ethical conduct, the majority of the stakeholders in the construction process have encountered unethical behavior at one time or another. This is a contentious issue because there is always disagreement about what is and is not ethical. This paper looks into two practices that are most common in construction contracting, namely unbalanced bidding, and pre-award bid shopping. Both practices are considered to be totally acceptable by some, and totally unethical by others. Both practices can be stopped if preventive measures are put in place. The nature of these behaviors is examined, their impact is assessed, and preventive measures are formulated. In addition, in rare instances, illegal practices come to light. Collusive behavior is one such practice that is difficult but not impossible to detect. The nature of bid rigging is examined, its impact is assessed, and recommendations are made to detect parties that are involved in collusive practices. In addition to professional associations’ efforts to publish standards for ethical conduct, the construction industry needs to be proactive in creating awareness about ethics issues, clear the confusion about what is ethical and what is not, and in promote ethical values throughout the entire spectrum of professions involved in construction.