Bidding Model for Refurbishment Work
Publication: Journal of Construction Engineering and Management
Volume 120, Issue 2
Abstract
This paper develops a simple statistical model for competitive bidding in the building industry. We take a statistical approach, using a large set of actual bids (1,350 renovation contracts) collected by the Builders' Conference in London, United Kingdom. The distribution of bids is fitted to a normal curve, from which one may estimate the distribution of the lowest of bids (representing a given contractor's competitors). Part of the study involves the estimation of various parameters, such as the coefficient of variation, which is a measure of the relative spread of bids. A simple formula is obtained for the bid that has a specified chance of success (e.g. 20%, 50%, or 90%), and the theory is tested on data from five contractors. A likely consequence of the adoption of the proposed models by the industry in general would be a tendency toward tighter bidding, i.e. the difference between the winning bid and the next lowest (which is, in a sense, a loss to the construction industry caused by variations in bids) would be reduced.
Get full access to this article
View all available purchase options and get full access to this article.
References
1.
Carr, R. I. (1982). “General bidding model.” J. Constr. Div., ASCE, 108(4), 639–650.
2.
Carr, R. I. (1983). “Impact of number of bidders on competition.” J. Constr. Engrg. and Mgmt., ASCE, 109, 61–73.
3.
Carr, R. I. (1987a). “Optimum markup by direct solution.” J. Constr. Engrg. and Mgmt., ASCE, 113, 138–150.
4.
Carr, R. I. (1987b). “Competitive bidding and opportunity costs.” J. Constr. Engrg. and Mgmt., ASCE, 113, 151–165.
5.
Cramer, H. (1946). Mathematical methods of statistics. Princeton University Press, Princeton University, N.J.
6.
Dixie, J. M. (1974). “Bidding models—the final resolution of a controversy.” J. Constr. Div., ASCE, 100(3), 265–271.
7.
Friedman, L. (1956). “A competitive bidding strategy.” Operations Res., 1(4), 104–112.
8.
Gates, M. (1971). “Bidding contingencies and probabilities.” J. Constr. Div., ASCE, 97, 277–303.
9.
Ioannou, P. G. (1988). “Building models—symmetry and state of information.” J. Constr. Engrg. and Mgmt., ASCE, 114(2), 214–232.
10.
Ioannou, P. G. (1989). “Dynamic probabilistic decision processes.” J. Constr. Engrg. and Mgmt., ASCE, 115(2), 237–257.
11.
King and Mercer. (1987). “Note on a conflict of assumptions in bidding models.” Eur. J. Operational Res., 32(3), 462–466.
12.
King and Mercer. (1988). “Recurrent competitive bidding.” J. Operational Res., 33(1), 2–16.
13.
Lindley, D. V., and Scott, W. F. (1984). New Cambridge elementary statistical tables. Cambridge University Press, Cambridge, England.
14.
McCaffer and Pettitt. (1976). “Distribution of bids for buildings and road contracts.” Operational Res. Quarterly, 27, 835–843.
15.
Naert and Weverbergh. (1978). “Cost uncertainty in competitive bidding models.” J. Operational Res. Soc., 29(4), 361–371.
16.
de Neufville, R., Hani, N., and Lesage, Y. (1977). “Bidding models: effects of bidders' risk aversion.” J. Constr. Div., ASCE, 103(1), 57–69.
17.
Rosenshine, M. (1972). “Bidding models: the resolution of a controversy.” J. Constr. Div., ASCE, 98, 143–148.
18.
Shaffer, L. R., and Micheau, T. W. (1971). “Bidding with competitive strategy models.” J. Constr. Div., ASCE, 97, 113–126.
19.
Teo, H. P. (1990). “Decision support and risk management system for competitive bidding in refurbishment work,” Ph.D. thesis, Heriot‐Watt University, Edinburgh, United Kingdom.
20.
Ward and Chapman. (1988). “Development of competitive bids: a framework for information processing.” J. Operational Res. Soc., 39, 123–134.
Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 120 • Issue 2 • June 1994
Pages: 257 - 273
Copyright
Copyright © 1994 American Society of Civil Engineers.
History
Received: Jun 11, 1991
Published online: Jun 1, 1994
Published in print: Jun 1994
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.