Utility-Theory Model for Bid Markup Decisions
Publication: Journal of Construction Engineering and Management
Volume 122, Issue 2
Abstract
A utility theory model, which is one of three generic methods for bid markup determination, is developed using 21 criteria in the bidding decision. The majority of the criteria are evaluated subjectively by a decision maker, and numerical quantification and evaluation is typically difficult for such criteria. Previous works of Saaty, Lifson and Shaifer, and Ahmad and Minkarah are used to develop a simplified approach using straight-line utility functions to resolve such difficulty. This bidding model accommodates the variation of different decision makers' attitude in the weighting of criteria, and thus the model can be customized to different preferences and bias of risk. Considering the subjectivity of the process, the writers consider the accuracy of this approach to be acceptable for the use of utility theory as one of the decision making tools that are available to assist the construction contractor in determination of bid(s) markup during bid preparation.
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References
1.
Admad, I., and Minkarah, I. A.(1988). “Questionnaire survey on bidding in construction.”J. Mgmt. in Engrg., ASCE, 4(3), 229–243.
2.
Ahmad, I., and Minkarah, I. A. (1987). “Optimum markup for bidding: a preference-uncertainty trade off approach.”Civ. Engrg. Sys., 4, 170– 174.
3.
Lifson, M. W., and Shaifer, E. F. (1982). Decision and risk analysis for construction management . John Wiley & Sons, Inc., New York, N.Y.
4.
Saaty, T. L.(1978). “Exploring the interface between the hierarchies, multiple objectives and fuzzy sets.”Fuzzy sets and systems, 1, 57–68.
5.
Schroeder, S. L. (1993). “Integrated construction bidding system,” MSc thesis, Dept. of Civ. Engrg., Univ. of Alberta, Edmonton, Alberta, Canada.
6.
Tavakoli, A., and Utomo, J. L.(1989). “Bid markup assistant: an expert system.”J. Cost Engrg., 31(6), 28–33.
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Copyright © 1996 American Society of Civil Engineers.
History
Published online: Jun 1, 1996
Published in print: Jun 1996
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