Critical Factors Affecting the Bid Cost of Building Construction Projects
Publication: Journal of Legal Affairs and Dispute Resolution in Engineering and Construction
Volume 15, Issue 3
Abstract
A cost database is essential for contractors to estimate accurate bid costs, and most contractors use historical cost databases for this purpose. Factors that influence bid cost should be investigated so that they are accurate. From the existing literature, this study identifies 30 factors that affect bid costs, and a survey was sent to 80 prime and subcontractors to determine the critical factors. The intraclass correlation test was conducted to determine the consistency of the responses. Then the Relative Importance Index (RII) was determined to identify the critical factors inhibiting the bid cost. In addition, the Mann-Whitney test was performed to determine whether the critical factors were highly ranked. Using RII and Mann-Whitney tests, the study determined seven critical factors that affect the bid cost of building projects: failure to track labor productivity; failure to report site-specific project conditions; failure to report complexity of the project; lacking documentation of union restrictions, regulations, local building code, and safety requirements; failure to report change order impact on labor productivity; failure to incorporate change orders into a cost control program; and failure to report project description. These findings will assist contractors to accurately bid building projects.
Practical Applications
The major practical implication of this study’s findings is that prime contractors and subcontractors can use these critical factors to determine an accurate bid of building construction projects. The contractors must pay attention to these top seven factors while determining the bid cost of building projects. If the contractors track the labor productivity and determine the change orders’ impact on labor productivity from their previous completed projects before bidding the building projects, the bid cost may be more accurate. Similarly, if they can conduct detailed investigations of the project sites, their locations, and their complexity, the prime contractors can include accurate contingency costs to cover these unknowns. In addition, prime contractors should be aware of rules and policy related to state and local building codes and contract procurement laws, and safety requirements in order to determine contingencies cost associated with these items, so that the bid cost can be accurate.
Get full access to this article
View all available purchase options and get full access to this article.
Data Availability Statement
All data that support the findings of this study are available from the corresponding authors upon reasonable request. The survey questionnaire is available upon request.
Acknowledgments
The research team would like to acknowledge the survey respondents who participated in this study to identify the critical factors affecting estimated bids.
References
Works Cited
Aibinu, A. A., and H. A. Odeyinka. 2006. “Construction delays and their causative factors in Nigeria.” J. Constr. Eng. Manage. 132 (7): 667–677. https://doi.org/10.1061/(ASCE)0733-9364(2006)132:7(667).
Aje, I. O., T. O. Oladinrin, and A. N. C. Nwaole. 2016. “Factors influencing success rate of contractors in competitive bidding for construction works in South-East, Nigeria.” J. Constr. Dev. Count 21 (1): 19–34. https://doi.org/10.21315/jcdc2016.21.1.2.
Al-Kofahi, Z. 2016. “Dynamic modeling approach to quantify change orders impact on labor productivity.” Doctoral dissertation, Dept. of Civil, Environmental and Construction Engineering, Univ. of Central Florida.
Alnuaimi, A. S., R. A. Taha, M. Al Mohsin, and A. S. Al-Harthi. 2010. “Causes, effects, benefits, and remedies of change orders on public construction projects in Oman.” J. Constr. Eng. Manage. 136 (5): 615–622. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000154.
CII (Construction Industry Institute). 1994. The effects of change on labor productivity: Why and how much. Austin, TX: CII.
Cong, J., J. Mbachu, and N. Domingo. 2014. “Factors influencing the accuracy of pre-contract stage estimation of final contract price in New Zealand.” Int. J. Constr. Supply Chain Manage. 4 (2): 51–64. https://doi.org/10.14424/ijcscm402014-51-64.
CURT (Construction Users Round Table). 2004. Construction project controls: Cost, schedule, and change management construction. UP-201. Cincinnati: CURT.
Dai, J., P. M. Goodrum, W. F. Maloney, and C. Srinivasan. 2009. “Latent structures of the factors affecting construction labor productivity.” J. Constr. Eng. Manage. 135 (5): 397–406. https://doi.org/10.1061/(ASCE)0733-9364(2009)135:5(397).
Dao, B., S. Kermanshachi, J. Shane, S. Anderson, and E. Hare. 2016. “Exploring and assessing project complexity.” J. Constr. Eng. Manage. 143 (5): 04016126. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001275.
Doloi, H. 2012. “Cost overruns and failure in project management: Understanding the roles of key stakeholders in construction projects.” J. Constr. Eng. Manage. 139 (3): 267–279. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000621.
Doloi, H., A. Sawhney, K. Iyer, and S. Rentala. 2012. “Analysing factors affecting delays in Indian construction projects.” Int. J. Project Manage. 30 (4): 479–489. https://doi.org/10.1016/j.ijproman.2011.10.004.
Durdyev, S. 2021. “Review of construction journals on causes of project cost overruns.” Eng. Constr. Arch. Manage. 28 (4): 1241–1260. https://doi.org/10.1108/ECAM-02-2020-0137.
Enshassi, A., S. Mohamed, and M. Abdel-Hadi. 2013. “Factors affecting the accuracy of pre-tender cost estimates in the Gaza Strip.” J. Constr. Dev. Countries 18 (1): 73–94.
Hatamleh, M. T., M. Hiyassat, G. J. Sweis, and R. J. Sweis. 2018. “Factors affecting the accuracy of cost estimate: Case of Jordan.” J. Constr. Eng. Manage. 21 (1): 113–131. https://doi.org/10.1108/ECAM-10-2016-0232.
Ibbs, W. 2012. “Construction change: Likelihood, severity, and impact on productivity.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 4 (3): 67–73. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000089.
Karimi, H., T. R. B. Taylor, G. B. Dadi, P. M. Goodrum, and C. Srinivasan. 2018. “Impact of skilled labor availability on construction project cost performance.” J. Constr. Eng. Manage. 144 (7): 04018057. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001512.
Keane, P., B. Sertyesilisik, and A. D. Ross. 2010. “Variations and change orders on construction projects.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 2 (2): 89–96. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000016.
Kissi, E., T. Adjei-Kumi, E. Badu, and B. Boateng. 2017. “Factors affecting tender price in the Ghanaian construction industry.” J. Finance Manage. Prop. Constr. 22 (3): 252–268. https://doi.org/10.1108/JFMPC-09-2016-0044.
Kiziltas, S., and B. Akinci. 2009. “Contextual information requirements of cost estimators from past construction projects.” J. Constr. Eng. Manage. 135 (9): 841–852. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000053.
Larsen, J. K., G. Q. Shen, S. M. Lindhard, and T. D. Brunoe. 2016. “Factors affecting schedule delay, cost overrun, and quality level in public construction projects.” J. Manage. Eng. 32 (1): 04015032. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000391.
Montgomery, A. A., A. Graham, P. H. Evans, and T. Fahey. 2002. “Inter-rater agreement in the scoring of abstracts submitted to a primary care research conference.” BMC Health Serv. Res. 2 (1): 8. https://doi.org/10.1186/1472-6963-2-8.
Moselhi, O., I. Assem, and K. El-Rayes. 2005. “Change orders impact on labor productivity.” J. Constr. Eng. Manage. 131 (3): 354–359. https://doi.org/10.1061/(ASCE)0733-9364(2005)131:3(354).
Murali, S., and S. Kumar. 2019. “Factors affecting overruns construction time and cost: A case study.” Int. J. Recent Tech. Eng. 7 (6C2): 2277–3878.
Obi, L. I., M. Arif, B. Awuzie, R. Islam, A. D. Gupta, and R. Walton. 2021. “Critical success factors for cost management in public-housing projects.” Constr. Innov. 21 (4): 625–647. https://doi.org/10.1108/CI-10-2020-0166.
O’Brien, W. J., and M. A. Fischer. 2000. “Importance of capacity constraints to construction cost and schedule.” J. Constr. Eng. Manage. 126 (5): 366–373. https://doi.org/10.1061/(ASCE)0733-9364(2000)126:5(366).
Oke, A., O. Ijie, and C. Aigbavboa. 2017a. “Appraisal of qualitative factors affecting contractors tender price in a developing country.” In Proc., Int. Federation of Surveyors (FIG) Working Week 2017 Conf. Copenhagen, Denmark: International Federation of Surveyors.
Oke, A. E., and C. O. Aigbavboa, and O. T. Ijie. 2017b. “Assessment of qualitative factors influencing contractors tender and project success in an emerging economy.” In Proc., 53rd ASC Annual Int. Conf., 463–470. Cheyenne, WY: Associated Schools of Construction.
Olawale, Y. A., and M. Sun. 2010. “Cost and time control of construction projects: Inhibiting factors and mitigating measures in practice.” Construct. Manage. Econ. 28 (5): 509–526. https://doi.org/10.1080/01446191003674519.
Oyegoke, A. S., R. Powell, S. Ajayi, G. A. G. R. Godawatte, and T. Akenroye. 2021. “Factors affecting the selection of effective cost control techniques in the UK construction industry.” J. Finance Manage. Prop. Constr. 27 (2): 141–160. https://doi.org/10.1108/JFMPC-07-2020-0050.
Santamaria, J., and V. Valentin. 2018. “Perceptions on construction-related factors that affect concrete quality, costs and production.” J. ACI Avance en Clencias e Ingenierias 10 (16): 120–139. https://doi.org/10.18272/aci.v10i1.980.
Selvanayagam, A. 2008. “Historical construction cost database and its application.” In Proc., 52nd Annual Meeting of AACE Int. and the 6th World Congress of ICEC on Cost Engineering, Project Management, and Quantity Surveying. Morgantown, WV: AACE International.
Sharma, V. K., P. Gupta, and R. K. Khitoliya. 2021. “Investigation of critical factors influencing cost overrun in highway construction projects.” In Proc., 3rd Int. Conf. on Innovative Technologies for Clean and Sustainable Development. Berlin: Springer.
Shrestha, K. 2016. “Framework of performance-based contracting for chip seal and striping maintenance activities.” Doctoral dissertation, Dept. of Civil and Environmental Engineering and Construction, Univ. of Nevada, Las Vegas.
Shrestha, K., A. Berg, M. Tafazzoli, and K. P. Kisi. 2022. “Comparing operating cost of washington safety rest areas with other states using performance-based method.” In Proc., 9th Int. Conf. on Construction Engineering and Project Management. Seoul: The International Consortium of Construction Engineering and Project Management.
Shrestha, K., and M. Powers. 2018. “Performance-based contracting for rest area maintaining.” In Proc., 54th ASC Annual Int. Conf., Associated Schools of Construction, ASC. Cheyenne, WY: The Associated Schools of Construction.
Shrestha, K., and P. P. Shrestha. 2020. “Framework development of performance-based striping maintenance contracts.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 12 (2): 04520014. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000385.
Shrestha, K., and P. P. Shrestha. 2022. “Framework to implement performance-based contracting for chip-seal road maintenance.” J. Const. Eng. Manage. 148 (1): 04021183. https://doi.org/10.1061/(ASCE)CO.1943-7862.0002207.
Shrestha, K., P. P. Shrestha, and M. Lidder. 2019. “Life-cycle cost comparison for chip seal and striping: In-house workers versus private contractors.” Eng. Constr. Archit. Manage. 26 (6): 927–944. https://doi.org/10.1108/ECAM-07-2018-0314.
Shrestha, P. P., and M. Fathi. 2019. “Impacts of change orders on cost and schedule performance and the correlation with project size of DB building projects.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 11 (3): 04519010. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000311.
Shrestha, P. P., and R. Maharjan. 2018. “Effects of change orders on cost growth, schedule growth, and construction intensity of large highway projects.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 10 (3): 04518012. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000264.
Shrestha, P. P., and R. Maharjan. 2019. “Effect of change orders on cost and schedule for small low-bid highway contracts.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 11 (4): 04519025. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000323.
Shrestha, P. P., and K. Shrestha. 2014. “An evaluation of current practices of road maintenance contracting methods.” In Proc., Construction Research Congress. Reston, VA: ASCE.
Shrestha, P. P., K. Shrestha, and V. Joshi. 2012. “Investigation of unbalanced bidding for economic sustainability.” In Proc., Int. Conf. on Sustainable Design, Engineering, and Construction. Reston, VA: ASCE.
Shrestha, P. P., K. Shrestha, A. Said, and M. Lidder. 2017a. “Factors affecting the selection of in-house and outsourcing road maintenance methods and assessment of their benefits.” J. Infrastruct. Syst. 23 (1): 06016001. https://doi.org/10.1061/(ASCE)IS.1943-555X.0000315.
Shrestha, P. P., K. K. Shrestha, and T. K. Kandie. 2017b. “Effects of change orders on the cost and schedule of rural road maintenance projects.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 9 (3): 04517010. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000227.
Shrestha, P. P., and H. Zeleke. 2018. “Effect of change orders on cost and schedule overruns of school building renovation projects.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 10 (4): 04518018. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000271.
Tahir, M. M., N. A. Haron, A. H. Alias, and I. A. Diugwu. 2017. “Causes of delay and cost overrun in Malaysian construction industry.” Lect. Notes Civ. Eng. 9: 47–57. https://doi.org/10.1007/978-981-10-8016-6_5.
Thomas, H. R., and C. L. Napolitan. 1995. “Quantitative effects of construction changes on labor productivity.” J. Constr. Eng. Manage. 121 (3): 290–296. https://doi.org/10.1061/(ASCE)0733-9364(1995)121:3(290).
Wanjari, S. P., and G. Dobariya. 2016. “Identifying factors causing cost overrun of the construction projects in India.” Sādhanā 41 (Jun): 679–693. https://doi.org/10.1007/s12046-016-0498-3.
Xue, A. 2011. “Analysis and countermeasures of project cost control in construction enterprises.” In Proc., 2nd Int. Conf. on E-Business and E-Government, ICEE 2011. New York: IEEE.
Zhao, T., and J. M. Dungan. 2021. “Pilot investigation of underestimates: Likelihood, severity, and impact on productivity.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 13 (4): 04521021. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000488.
Information & Authors
Information
Published In
Journal of Legal Affairs and Dispute Resolution in Engineering and Construction
Volume 15 • Issue 3 • August 2023
Copyright
© 2023 American Society of Civil Engineers.
History
Received: Oct 13, 2022
Accepted: Feb 4, 2023
Published online: Apr 12, 2023
Published in print: Aug 1, 2023
Discussion open until: Sep 12, 2023
ASCE Technical Topics:
- Benefit cost ratios
- Bids
- Building codes
- Buildings
- Business management
- Computing in civil engineering
- Construction costs
- Construction engineering
- Construction management
- Contracts and subcontracts
- Databases
- Financial management
- Information Technology (IT)
- Practice and Profession
- Project management
- Standards and codes
- Structural engineering
- Structures (by type)
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.