Empirical Bid or No Bid Decision Process in International Construction Projects: Structural Equation Modeling Framework
Publication: Journal of Construction Engineering and Management
Volume 146, Issue 6
Abstract
The bid or no bid decision in international construction projects requires complex multiattribute analysis. Thus far, there exists no comprehensive framework to support the decision process. The objective of this study is to construct such a framework to support international contractors. Following a comprehensive literature review, five criteria and 41 factors were identified that bear on the decision. Questionnaire surveys were used to collect experts’ opinions on the importance of these factors in the decision of Chinese international contractors (CICs). The 41 factors were classified into six groups using factor analysis, with relationships among them validated through structural equation modeling (SEM). By integrating the five criteria with the six factors, a systematic framework for a no bid decision was developed. The outcome reveals that the bidding decision is a multistage decision process conducted in the following sequence: country risk vulnerability → ability to perform → project risk vulnerability → profitability → probability of winning. In validating this framework, a case study was also examined. Thus, this paper contributes to the body of knowledge on bid or no bid decision-making by offering an empirical framework that effectively links factors to criteria, and which sets out a basis on which contractors may rationally base a bid or no bid decision in the international arena.
Get full access to this article
View all available purchase options and get full access to this article.
Data Availability Statement
Data used and analyzed during this study is available from the corresponding author by request.
Acknowledgments
This study is supported by the National Natural Science Foundation of China (No. 71371131) and Chengdu University of Technology (No. JG183029). Acknowledgment is also made to the China Association of Construction Enterprise Management for support in the collection of data.
References
Ahmad, I. 1990. “Decision-support system for modeling bid/no-bid decision problem.” J. Constr. Eng. Manage. 116 (4): 595–608. https://doi.org/10.1061/(ASCE)0733-9364(1990)116:4(595).
Ahmad, I., and I. Minkarah. 1988. “Questionnaire survey on bidding in construction.” J. Manage. Eng. 4 (3): 229–243. https://doi.org/10.1061/(ASCE)9742-597X(1988)4:3(229).
Ashley, D. B., and J. J. Bonner. 1987. “Political risks in international construction.” J. Constr. Eng. Manage. 113 (3): 447–467. https://doi.org/10.1061/(ASCE)0733-9364(1987)113:3(447).
Aznar, B., E. Pellicer, S. Davis, and P. Ballesteros-Pérez. 2017. “Factors affecting contractor’s bidding success for international infrastructure projects in Australia.” J. Civ. Eng. Manage. 23 (7): 880–889. https://doi.org/10.3846/13923730.2017.1341955.
Bageis, A. S., and C. Fortune. 2009. “Factors affecting the bid/no bid decision in the Saudi Arabian construction contractors.” Constr. Manage. Econ. 27 (1): 53–71. https://doi.org/10.1080/01446190802596220.
Bagies, A., and C. Fortune. 2006. “Bid/no-bid decision modelling for construction projects.” In Proc., 22nd Annual ARCOM Conf. on Association of Researchers in Construction Management, ARCOM 2006, 511–521. Reading, UK: Association of Researchers in Construction Management.
Barber, R. B. 2005. “Understanding internally generated risks in projects.” Int. J. Project Manage. 23 (8): 584–590. https://doi.org/10.1016/j.ijproman.2005.05.006.
Bentler, P. M., and C. P. Chou. 1987. “Practical issues in structural modeling.” Sociological Methods Res. 16 (1): 78–117. https://doi.org/10.1177/0049124187016001004.
Carr, R. I., and J. W. Sandahl. 1978. “Bidding strategy using multiple regression.” J. Constr. Div. 104 (1): 15–26.
Chan, E. H. W., and R. Y. C. Tse. 2003. “Cultural considerations in international construction contracts.” J. Constr. Eng. Manage. 129 (4): 375–381. https://doi.org/10.1061/(ASCE)0733-9364(2003)129:4(375).
Chen, C. 2008. “Entry mode selection for international construction markets: The influence of host country related factors.” Constr. Manage. Econ. 26 (3): 303–314. https://doi.org/10.1080/01446190701882382.
Chen, C., and J. I. Messner. 2009. “Entry mode taxonomy for international construction markets.” J. Manage. Eng. 25 (1): 3–11. https://doi.org/10.1061/(ASCE)0742-597X(2009)25:1(3).
Chen, C., Q. Wang, I. Martek, and H. Li. 2016. “International market selection model for large Chinese contractors.” J. Constr. Eng. Manage. 142 (10): 04016044. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001122.
Chen, C. T., and H. L. Cheng. 2009. “A comprehensive model for selecting information system project under fuzzy environment.” Int. J. Project Manage. 27 (4): 389–399. https://doi.org/10.1016/j.ijproman.2008.04.001.
Chua, D. K. H., and D. Li. 2000. “Key factors in bid reasoning model.” J. Constr. Eng. Manage. 126 (5): 349–357. https://doi.org/10.1061/(ASCE)0733-9364(2000)126:5(349).
de Neufville, R., and D. King. 1991. “Risk and need-for-work premiums in contractor bidding.” J. Constr. Eng. Manage. 117 (4): 659–673. https://doi.org/10.1061/(ASCE)0733-9364(1991)117:4(659).
Deng, X., S. P. Low, and X. Zhao. 2014. “Project system vulnerability to political risks in international construction projects: The case of Chinese contractors.” Project Manage. J. 45 (2): 20–33. https://doi.org/10.1002/pmj.21397.
Dikmen, I., and M. T. Birgonul. 2004. “Neural network model to support international market entry decisions.” J. Constr. Eng. Manage. 130 (1): 59–66. https://doi.org/10.1061/(ASCE)0733-9364(2004)130:1(59).
Dikmen, I., M. T. Birgonul, and A. K. Gur. 2007a. “A case-based decision support tool for bid mark-up estimation of international construction projects.” Autom. Constr. 17 (1): 30–44. https://doi.org/10.1016/j.autcon.2007.02.009.
Dikmen, I., M. T. Birgonul, and S. Han. 2007b. “Using fuzzy risk assessment to rate cost overrun risk in international construction projects.” Int. J. Project Manage. 25 (5): 494–505. https://doi.org/10.1016/j.ijproman.2006.12.002.
Drew, D. S. 1997. “The effect of contract type and size on competitiveness in construction contract bidding.” Constr. Manage. Econ. 15: 469–489. https://doi.org/10.1080/014461997372836.
Egemen, M., and A. Mohamed. 2007. “A framework for contractors to reach strategically correct bid/no bid and mark-up size decisions.” Build. Environ. 42 (3): 1373–1385. https://doi.org/10.1016/j.buildenv.2005.11.016.
Egemen, M., and A. Mohamed. 2008. “SCBMD: A knowledge-based system software for strategically correct bid/no bid and mark-up size decisions.” Autom. Constr. 17 (7): 864–872. https://doi.org/10.1016/j.autcon.2008.02.013.
El-Mashaleh, M. S. 2010. “Decision to bid or not to bid: A data envelopment analysis approach.” Can. J. Civ. Eng. 37 (1): 37–44. https://doi.org/10.1139/L09-119.
El-Mashaleh, M. S. 2013. “Empirical framework for making the bid/no-bid decision.” J. Manage. Eng. 29 (3): 200–205. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000147.
ENR (Engineering News Record). 2018. “Top 250 international contractors.” Engineering News Record. Accessed August 20/27, 2018. https://www.enr.com/toplists/2018-Top-250-International-Contractors-1.
Eybpoosh, M., I. Dikmen, and M. T. Birgonul. 2011. “Identification of risk paths in international construction projects using structural equation modeling.” J. Constr. Eng. Manage. 137 (12): 1164–1175. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000382.
Fayek, A., I. Ghoshal, and S. AbouRizk. 1999. “A survey of the bidding practices of Canadian civil engineering construction contractors.” Can. J. Civ. Eng. 26 (1): 13–25. https://doi.org/10.1139/l98-038.
Field, A. P. 2005. Discovering statistics using SPSS. London: Sage.
Friedman, L. 1956. “A competitive bidding strategy.” Oper. Res. 4 (1): 104–112. https://doi.org/10.1287/opre.4.1.104.
Gates, M. 1967. “Bidding strategies and probabilities.” J. Constr. Div. 93 (1): 75–107.
Gunhan, S., and D. Arditi. 2005a. “Factors affecting international construction.” J. Constr. Eng. Manage. 131 (3): 273–282. https://doi.org/10.1061/(ASCE)0733-9364(2005)131:3(273).
Gunhan, S., and D. Arditi. 2005b. “International expansion decision for construction companies.” J. Constr. Eng. Manage. 131 (8): 928–937. https://doi.org/10.1061/(ASCE)0733-9364(2005)131:8(928).
Hair, J., G. T. M. Hult, C. Ringle, and M. Sarstedt. 2016. A primer on partial least squares structural equation modeling (PLS-SEM). Thousand Oaks, CA: Sage.
Han, S. H. 1995. “Risk-based go/no-go decision making model for international construction projects: The cross-impact analysis approach.” Ph.D. dissertation, Dept. of Civil, Environment, and Architectural Engineering, Univ. of Colorado Boulder.
Han, S. H., and J. E. Diekmann. 2001a. “Approaches for making risk-based go/no-go decision for international projects.” J. Constr. Eng. Manage. 127 (4): 300–308. https://doi.org/10.1061/(ASCE)0733-9364(2001)127:4(300).
Han, S. H., and J. E. Diekmann. 2001b. “Making a risk-based bid decision for overseas construction projects.” Constr. Manage. Econ. 19 (8): 765–776. https://doi.org/10.1080/01446190110072860.
Han, S. H., D. Y. Kim, and H. Kim. 2007. “Predicting profit performance for selecting candidate international construction projects.” J. Constr. Eng. Manage. 133 (6): 425–436. https://doi.org/10.1061/(ASCE)0733-9364(2007)133:6(425).
Hassanein, A. A. G. 1996. “Factors affecting the bidding behaviour of contractors in Egypt.” Build. Res. Inf. 24 (4): 228–236. https://doi.org/10.1080/09613219608727534.
Hastak, M., and A. Shaked. 2000. “ICRAM-1: Model for international construction risk assessment.” J. Manage. Eng. 16 (1): 59–69. https://doi.org/10.1061/(ASCE)0742-597X(2000)16:1(59).
Isa, C. M. M., H. M. Saman, and S. R. M. Nasir. 2014. “Specific-factors influencing market selection decision by Malaysian construction firms into international market.” Procedia—Social Behav. Sci. 129 (May): 4–10. https://doi.org/10.1016/j.sbspro.2014.03.641.
Jalaei, F., and A. Jrade. 2014. “Modeling bid/no bid decision using adaptive neuro fuzzy inference system.” In Proc., Construction Research Congress 2014, 140–149. Reston, VA: ASCE.
Jarkas, A. M., S. A. Mubarak, and C. Y. Kadri. 2014. “Critical factors determining bid/no bid decisions of contractors in Qatar.” J. Manage. Eng. 30 (4): 05014007. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000223.
Kaiser, M. G., F. El Arbi, and F. Ahlemann. 2015. “Successful project portfolio management beyond project selection techniques: Understanding the role of structural alignment.” Int. J. Project Manage. 33 (1): 126–139. https://doi.org/10.1016/j.ijproman.2014.03.002.
Keizer, J. A., J. I. M. Halman, and M. Song. 2002. “From experience: Applying the risk diagnosing methodology.” J. Prod. Innovation Manage. 19 (3): 213–232. https://doi.org/10.1111/1540-5885.1930213.
Kim, D. Y., S. H. Han, H. Kim, and H. Park. 2009. “Structuring the prediction model of project performance for international construction projects: A comparative analysis.” Expert Syst. Appl. 36 (2): 1961–1971. https://doi.org/10.1016/j.eswa.2007.12.048.
Le, Y., M. Shan, A. P. C. Chan, and Y. Hu. 2014. “Investigating the causal relationships between causes of and vulnerabilities to corruption in the Chinese public construction sector.” J. Constr. Eng. Manage. 140 (9): 05014007. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000886.
Leśniak, A., and E. Plebankiewicz. 2015. “Modeling the decision-making process concerning participation in construction bidding.” J. Manage. Eng. 31 (2): 04014032. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000237.
Lim, B. T. H., F. Y. Y. Ling, C. W. Ibbs, B. Raphael, and G. Ofori. 2011. “Empirical analysis of the determinants of organizational flexibility in the construction business.” J. Constr. Eng. Manage. 137 (3): 225–237. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000272.
Liu, J., X. Zhao, and P. Yan. 2016. “Risk paths in international construction projects: Case study from Chinese contractors.” J. Constr. Eng. Manage. 142 (6): 05016002. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001116.
Low, W. W., H. Abdul-Rahman, and N. Zakaria. 2015. “The impact of organizational culture on international bidding decisions: Malaysia context.” Int. J. Project Manage. 33 (4): 917–931. https://doi.org/10.1016/j.ijproman.2014.10.010.
Lowe, D. J., and J. Parvar. 2004. “A logistic regression approach to modelling the contractor’s decision to bid.” Constr. Manage. Econ. 22 (6): 643–653. https://doi.org/10.1080/01446190310001649056.
Marzouk, M., and E. Mohamed. 2017. “Modeling bid/no bid decisions using fuzzy fault tree.” Constr. Innovation 18 (1): 99–108. https://doi.org/10.1108/CI-11-2016-0060.
Mehrabian, A., and J. A. Russell. 1974. An approach to environmental psychology. Cambridge, MA: MIT Press.
Messner, J. 1994. “An information framework for evaluating international construction projects.” Ph.D. dissertation, Dept. of Architectural Engineering.
Morteza, S.-G., and C. Nicholas. 2016. “Critical factors influencing the bid/no bid decision in the Australian construction industry.” Constr. Innovation 16 (2): 127–157. https://doi.org/10.1108/CI-04-2015-0021.
Ning, Y. 2014. “Quantitative effects of drivers and barriers on networking strategies in public construction projects.” Int. J. Project Manage. 32 (2): 286–297. https://doi.org/10.1016/j.ijproman.2013.04.003.
Odusote, O. O., and R. F. Fellows. 1992. “An examination of the importance of resource considerations when contractors make project selection decisions.” Constr. Manage. Econ. 10 (2): 137–151. https://doi.org/10.1080/01446199200000013.
Olatunji, O. A., O. I. Aje, and S. Makanjuola. 2017. “Bid or no-bid decision factors of indigenous contractors in Nigeria.” Eng. Constr. Archit. Manage. 24 (3): 378–392. https://doi.org/10.1108/ECAM-01-2016-0029.
Oo, B. L., D. S. Drew, and H. P. Lo. 2008a. “A comparison of contractors’ decision to bid behaviour according to different market environments.” Int. J. Project Manage. 26 (4): 439–447. https://doi.org/10.1016/j.ijproman.2007.06.001.
Oo, B.-L., D. S. Drew, and H.-P. Lo. 2008b. “Heterogeneous approach to modeling contractors’ decision-to-bid strategies.” J. Constr. Eng. Manage. 134 (10): 766–775. https://doi.org/10.1061/(ASCE)0733-9364(2008)134:10(766).
Ravanshadnia, M., H. Rajaie, and H. R. Abbasian. 2011. “A comprehensive bid/no bid decision making framework for construction companies.” Trans. Civ. Environ. Eng. 35 (C1): 95–103. https://doi.org/10.22099/IJSTC.2012.659.
Reinartz, W., M. Haenlein, and J. Henseler. 2009. “An empirical comparison of the efficacy of covariance-based and variance-based SEM.” Int. J. Res. Marketing 26 (4): 332–344. https://doi.org/10.1016/j.ijresmar.2009.08.001.
Ringle, C. M., M. Sarstedt, and D. W. Straub. 2012. “A critical look at the use of PLS-SEM in MIS quarterly.” MIS Q. 36 (1): iii–xiv. https://doi.org/10.2307/41410402.
Sauer, B. A. 1996. “Communicating risk in a cross-cultural context.” J. Bus. Tech. Commun. 10 (3): 306–329. https://doi.org/10.1177/1050651996010003002.
Seydel, J., and D. L. Olson. 1990. “Bids considering multiple criteria.” J. Constr. Eng. Manage. 116 (4): 609–623. https://doi.org/10.1061/(ASCE)0733-9364(1990)116:4(609).
Shash, A. A. 1993. “Factors considered in tendering decisions by top UK contractors.” Constr. Manage. Econ. 11 (2): 111–118. https://doi.org/10.1080/01446199300000004.
Shi, L., R. Zhang, Q. Xie, and L. Fu. 2009. “Improving analytic hierarchy process applied to fire risk analysis of public building.” Chin. Sci. Bull. 54 (8): 1442–1450. https://doi.org/10.1007/s11434-009-0056-z.
Sonmez, R., and B. Sözgen. 2017. “A support vector machine method for bid/no bid decision making.” J. Civ. Eng. Manage. 23 (5): 641–649. https://doi.org/10.3846/13923730.2017.1281836.
Tabachnick, B. G., and L. S. Fidell. 2013. Using multivariate statistics. Boston: Pearson Education.
Urbach, N. 2010. “Structural equation modeling in information systems research using partial least squares.” J. Inf. Technol. Theory Appl. 11 (2): 5–40.
Wang, J., Y. Xu, and Z. Li. 2009. “Research on project selection system of pre-evaluation of engineering design project bidding.” Int. J. Project Manage. 27 (6): 584–599. https://doi.org/10.1016/j.ijproman.2008.10.003.
Wang, S. Q., M. F. Dulaimi, and M. Y. Aguria. 2004. “Risk management framework for construction projects in developing countries.” Constr. Manage. Econ. 22 (3): 237–252. https://doi.org/10.1080/0144619032000124689.
Wanous, M., A. H. Boussabaine, and J. Lewis. 1998. “Tendering factors considered by Syrian contractors.” In Vol. 2 of Proc., 14th Annual ARCOM Conf., 535–543. Reading, UK: Association of Researchers in Construction Management.
Wanous, M., H. A. Boussabaine, and J. Lewis. 2003. “A neural network bid/no bid model: The case for contractors in Syria.” Constr. Manage. Econ. 21 (7): 737–744. https://doi.org/10.1080/0144619032000093323.
Zhang, H. 2007. “A redefinition of the project risk process: Using vulnerability to open up the event-consequence link.” Int. J. Project Manage. 25 (7): 694–701. https://doi.org/10.1016/j.ijproman.2007.02.004.
Zhao, X., B. G. Hwang, and S. P. Low. 2013. “Critical success factors for enterprise risk management in Chinese construction companies.” Constr. Manage. Econ. 31 (12): 1199–1214. https://doi.org/10.1080/01446193.2013.867521.
Zhi, H. 1995. “Risk management for overseas construction projects.” Int. J. Project Manage. 13 (4): 231–237. https://doi.org/10.1016/0263-7863(95)00015-I.
Zou, P. X. W., G. Zhang, and J. Wang. 2007. “Understanding the key risks in construction projects in China.” Int. J. Project Manage. 25 (6): 601–614. https://doi.org/10.1016/j.ijproman.2007.03.001.
Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 146 • Issue 6 • June 2020
Copyright
©2020 American Society of Civil Engineers.
History
Received: Apr 17, 2019
Accepted: Nov 12, 2019
Published online: Mar 24, 2020
Published in print: Jun 1, 2020
Discussion open until: Aug 24, 2020
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.