Share:


Enhancement of bid decision-making in construction projects: a reliability analysis approach

    Farzad Ghodoosi Affiliation
    ; Ashutosh Bagchi Affiliation
    ; M. Reza Hosseini   Affiliation
    ; Tatjana Vilutienė   Affiliation
    ; Mehran Zeynalian   Affiliation

Abstract

Various risks significantly influence pricing of bids and a wide range of factors impact bid pricing risks. Of these, client’s reputation and the record of projects owned by a client have vital contribution on the issue. Current practices however fail to capture the impacts of client-related factors. There is a need for developing a practical quantitative approach, which enables estimators to process bid risk allocation easily. Through reliability analysis, the developed method proposed in this study enables practitioners to make informed bid/no-bid decisions based on estimating the probabilities of schedule and cost overruns. Estimating the probability of project failure enables estimators to quantify the risk element of bid price. In addition, schedule and cost overrun cumulative probability distributions can be used to estimate the expected value of these variables. The practicability of this proposed method is tested by empirical data obtained from 40 university construction projects of one client, for estimating the bid price of a low-rise building. For researchers, findings provide illuminating insight into the potential of using reliability analysis as a valuable tool for bid decision-making practices. So too, the proposed method offers a blueprint for estimating and calculating time and contingency – and managing associated risks – in planning construction projects. The contribution of this study for the world of practice lies in providing a simple, rapid and cost-effective method for bid decision-making processes.

Keyword : bid decision-making, reliability analysis, tender, contingency, risks, construction procurement

How to Cite
Ghodoosi, F., Bagchi, A., Hosseini, M. R., Vilutienė, T., & Zeynalian, M. (2021). Enhancement of bid decision-making in construction projects: a reliability analysis approach. Journal of Civil Engineering and Management, 27(3), 149-161. https://doi.org/10.3846/jcem.2021.14344
Published in Issue
Feb 26, 2021
Abstract Views
344
PDF Downloads
300
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Alsharqawi, Y. (2016). Cost planning strategy in bidding stage using 5D BIM. Eastern Mediterranean University (EMU)-Doğu Akdeniz Üniversitesi (DAÜ).

Asgari, S., Awwad, R., Kandil, A., & Odeh, I. (2016). Impact of considering need for work and risk on performance of construction contractors: An agent-based approach. Automation in Construction, 65, 9–20. https://doi.org/10.1016/j.autcon.2016.01.004

Aven, T., & Zio, E. (2011). Some considerations on the treatment of uncertainties in risk assessment for practical decision making. Reliability Engineering & System Safety, 96(1), 64–74. https://doi.org/10.1016/j.ress.2010.06.001

Awwad, R. (2016). Evolutionary simulation of contractors’ learning and behavior under two bid-tendering approaches. Journal of Management in Engineering, 32(2), 04015041. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000400

Awwad, R., & Ammoury, M. (2019). Owner’s perspective on evolution of bid prices under various price-driven bid selection methods. Journal of Computing in Civil Engineering, 33(2), 04018061. https://doi.org/10.1061/(ASCE)CP.1943-5487.0000803

Aznar, B., Pellicer, E., Davis, S., & Ballesteros-Pérez, P. (2017). Factors affecting contractor’s bidding success for international infrastructure projects in Australia. Journal of Civil Engineering and Management, 23(7), 880–889. https://doi.org/10.3846/13923730.2017.1341955

Ballesteros-Pérez, P., González-Cruz, M. C., & Cañavate-Grimal, A. (2013). On competitive bidding: Scoring and position probability graphs. International Journal of Project Management, 31(3), 434–448. https://doi.org/10.1016/j.ijproman.2012.09.012

Ballesteros-Pérez, P., González-Cruz, M. C., Fernández-Diego, M., & Pellicer, E. (2014). Estimating future bidding performance of competitor bidders in capped tenders. Journal of Civil Engineering and Management, 20(5), 702–713. https://doi.org/10.3846/13923730.2014.914096

Ballesteros-Pérez, P., & Skitmore, M. (2016). Estimating the number of new and repeated bidders in construction auctions. Construction Management and Economics, 34(12), 919–934. "https://doi.org/10.1080/01446193.2016.1231408

Biruk, S., Jaśkowski, P., & Czarnigowska, A. (2017). Modelling contractor’s bidding decision. Ekonomia i Zarzadzanie, 9(1), 64–73. https://doi.org/10.1515/emj-2017-0007

Carr, R. I. (1982). General bidding model. Journal of the Construction Division, 108(4), 639–650.

Chao, L. C. (2007). Fuzzy logic model for determining minimum bid markup. Computer‐Aided Civil and Infrastructure Engineering, 22(6), 449–460. https://doi.org/10.1111/j.1467-8667.2007.00500.x

Cheng, M.-Y., Hsiang, C.-C., Tsai, H.-C., & Do, H.-L. (2011). Bidding decision making for construction company using a multi-criteria prospect model. Journal of Civil Engineering and Management, 17(3), 424–436. https://doi.org/10.3846/13923730.2011.598337

Chileshe, N., Kavishe, N., & Edwards, D. J. (2020). Critical factors influencing the bid or no-bid decision of the indigenous small building contractors in Tanzania. Construction Innovation. https://doi.org/10.1108/CI-09-2019-0098

Chou, J.-S., Pham, A.-D., & Wang, H. (2013). Bidding strategy to support decision-making by integrating fuzzy AHP and regression-based simulation. Automation in Construction, 35, 517–527. https://doi.org/10.1016/j.autcon.2013.06.007

Chua, D., & Li, D. (2000). Key factors in bid reasoning model. Journal of Construction Engineering and Management, 126(5), 349–357. https://doi.org/10.1061/(ASCE)0733-9364(2000)126:5(349)

Chua, D., Li, D., & Chan, W. (2001). Case-based reasoning approach in bid decision making. Journal of Construction Engineering and Management, 127(1), 35–45. https://doi.org/10.1061/(ASCE)0733-9364(2001)127:1(35)

Duzkale, A. K., & Lucko, G. (2016a). Exposing uncertainty in bid preparation of steel construction cost estimating: I. Conceptual framework and qualitative CIVIL classification. Journal of Construction Engineering and Management, 142(10), 04016049. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001117

Duzkale, A. K., & Lucko, G. (2016b). Exposing uncertainty in bid preparation of steel construction cost estimating: II. Comparative analysis and quantitative CIVIL classification. Journal of Construction Engineering and Management, 142(10), 04016050. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001124

Egemen, M., & Mohamed, A. N. (2007). A framework for contractors to reach strategically correct bid/no bid and mark-up size decisions. Building and Environment, 42(3), 1373–1385. https://doi.org/10.1016/j.buildenv.2005.11.016

El-Mashaleh, M. S. (2010). Decision to bid or not to bid: a data envelopment analysis approach. Canadian Journal of Civil Engineering, 37(1), 37–44. https://doi.org/10.1139/L09-119

Elghaish, F., Abrishami, S., Hosseini, M. R., & Abu-Samra, S. (2020). Revolutionising cost structure for integrated project delivery: a BIM-based solution. Engineering, Construction and Architectural Management. https://doi.org/10.1108/ECAM-04-2019-0222

Galway, L. (2004). Quantitative risk analysis for project management. RAND Corporation. http://www.rand.org/pubs/working_papers

Ghoddousi, P., & Hosseini, M. R. (2012). A survey of the factors affecting the productivity of construction projects in Iran. Technological and Economic Development of Economy, 18(1), 99–116. https://doi.org/10.3846/20294913.2012.661203

Ghodoosi, F., Bagchi, A., & Zayed, T. (2015). System-level deterioration model for reinforced concrete bridge decks. Journal of Bridge Engineering, 20(5), 04014081. https://doi.org/10.1061/(ASCE)BE.1943-5592.0000670

Ghodoosi, F., Bagchi, A., & Zayed, T. (2016). Reliability-based condition assessment of an externally restrained bridge deck system considering uncertainties in key design parameters. Journal of Performance of Constructed Facilities, 30(1), 04014189. https://doi.org/10.1061/(ASCE)CF.1943-5509.0000699

Hosseini, M. R., Banihashemi, S., Chileshe, N., Namzadi, M. O., Udeaja, C., Rameezdeen, R., & McCuen, T. (2016). BIM adoption within Australian Small and Medium-sized Enterprises (SMEs): an innovation diffusion model. Construction Economics and Building, 16(3), 71–86. https://doi.org/10.5130/AJCEB.v16i3.5159

Hu, X., Xia, B., Skitmore, M., & Chen, Q. (2016). The application of case-based reasoning in construction management research: An overview. Automation in Construction, 72, 65–74. https://doi.org/10.1016/j.autcon.2016.08.023

Hwang, J.-S., & Kim, Y.-S. (2016). A bid decision-making model in the initial bidding phase for overseas construction projects. KSCE Journal of Civil Engineering, 20(4), 1189–1200. https://doi.org/10.1007/s12205-015-0760-y

Johansson, J., Hassel, H., & Zio, E. (2013). Reliability and vulnerability analyses of critical infrastructures: Comparing two approaches in the context of power systems. Reliability Engineering & System Safety, 120, 27–38. https://doi.org/10.1016/j.ress.2013.02.027

Kitchenham, B., Pickard, L. M., Linkman, S., & Jones, P. W. (2003). Modeling software bidding risks. IEEE Transactions on Software Engineering, 29(6), 542–554. https://doi.org/10.1109/TSE.2003.1205181

Laryea, S., & Hughes, W. (2008). How contractors price risk in bids: theory and practice. Construction Management and Economics, 26(9), 911–924. https://doi.org/10.1080/01446190802317718

Laryea, S., & Hughes, W. (2011). Risk and price in the bidding process of contractors. Journal of Construction Engineering and Management, 137(4), 248–258. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000293

Leśniak, A. (2015). Reliability assessment of research into contractors’ bidding decisions. Procedia Engineering, 122, 251– 257. https://doi.org/10.1016/j.proeng.2015.10.033

Leśniak, A., & Plebankiewicz, E. (2015). Modeling the decisionmaking process concerning participation in construction bidding. Journal of Management in Engineering, 31(2), 04014032. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000237

Li, G., Zhang, G., Chen, C., & Martek, I. (2020). Empirical bid or no bid decision process in international construction projects: Structural equation modeling framework. Journal of Construction Engineering and Management, 146(6), 04020050. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001830

Ling, F. Y. Y., & Liu, M. (2005). Factors considered by successful and profitable contractors in mark-up size decision in Singapore. Building and Environment, 40(11), 1557–1565. https://doi.org/10.1016/j.buildenv.2004.12.001

Love, P. E., Sing, C., Wang, X., Edwards, D. J., & Odeyinka, H. (2013). Probability distribution fitting of schedule overruns in construction projects. Journal of the Operational Research Society, 64(8), 1231–1247. https://doi.org/10.1057/jors.2013.29

Nowak, A. S., & Collins, K. R. (2000). Reliability of structures. McGraw-Hill.

Owusu, E. K., Chan, A. P., Hosseini, M. R., & Nikmehr, B. (2020). Assessing procurement irregularities in the supply-chain of Ghanaian construction projects: a soft-computing approach. Journal of Civil Engineering and Management, 26(1), 66–82. https://doi.org/10.3846/jcem.2020.11659

Russell, J. S., & Jaselskis, E. J. (1992). Predicting construction contractor failure prior to contract award. Journal of Construction Engineering and Management, 118(4), 791–811. https://doi.org/10.1061/(ASCE)0733-9364(1992)118:4(791)

Shokri-Ghasabeh, M., & Chileshe, N. (2016). Critical factors influencing the bid/no bid decision in the Australian construction industry. Construction Innovation, 16(2), 127–157. https://doi.org/10.1108/CI-04-2015-0021

Singh, V. P., Jain, S. K., & Tyagi, A. K. (2007). Risk and reliability analysis: a handbook for civil and environmental engineers. American Society of Civil Engineers (ASCE). https://doi.org/10.1061/9780784408919

Smith, G. R., & Bohn, C. M. (1999). Small to medium contractor contingency and assumption of risk. Journal of Construction Engineering and Management, 125(2), 101–108. https://doi.org/10.1061/(ASCE)0733-9364(1999)125:2(101)

Sonmez, R., & Sözgen, B. (2017). A support vector machine method for bid/no bid decision making. Journal of Civil Engineering and Management, 23(5), 641–649. https://doi.org/10.3846/13923730.2017.1281836

Su, L., Wang, T., Li, H., Chao, Y., & Wang, L. (2020). Multi-criteria decision making for identification of unbalanced bidding. Journal of Civil Engineering and Management, 26(1), 43–52. https://doi.org/10.3846/jcem.2019.11568

Tung, Y.-K., Yen, B.-C., & Melching, C. (2006). Hydrosystems engineering reliability assessment and risk analysis. McGraw Hill.

Urquhart, S., & Whyte, A. (2018). Contractor tendering research: going beyond bid/no-bid and markup models. Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 170(6), 255–262. https://doi.org/10.1680/jmapl.17.00039

Vilutienė, T., & Zavadskas, E. K. (2003). The application of multicriteria analysis to decision support for the facility management of a residential district. Journal of Civil Engineering and Management, 9(4), 241–252. https://doi.org/10.1080/13923730.2003.10531335

Wanous, M., Boussabaine, H. A., & Lewis, J. (2003). A neural network bid/no bid model: the case for contractors in Syria. Construction Management and Economics, 21(7), 737–744. https://doi.org/10.1080/0144619032000093323

Yazdani, M., Wen, Z., Liao, H., Banaitis, A., & Turskis, Z. (2019). A grey combined compromise solution (COCOSO-G) method for supplier selection in construction management. Journal of Civil Engineering and Management, 25(8), 858–874. https://doi.org/10.3846/jcem.2019.11309

Ye, K., Shen, L., Xia, B., & Li, B. (2014). Key attributes underpinning different markup decision between public and private projects: A China study. International Journal of Project Management, 32(3), 461–472. https://doi.org/10.1016/j.ijproman.2013.06.001

Zeynalian, M., Trigunarsyah, B., & Ronagh, H. R. (2012). Modification of advanced programmatic risk analysis and management model for the whole project life cycle’s risks. Journal of Construction Engineering and Management, 139(1), 51–59. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000571

Zio, E. (2009). Reliability engineering: Old problems and new challenges. Reliability Engineering & System Safety, 94(2), 125–141. https://doi.org/10.1016/j.ress.2008.06.002