Abstract:
Construction contractors often procure projects through a competitive bidding process. Every
contractor intends to bid competitively while dealing with the associated risks concurrently. Contractors
have developed their own bidding strategies to retain their competitive edge. However, these strategies
may carry an inherent risk component that is unforeseen leading to what is termed the ‘winner’s curse’.
The aim of this study is to identify the risks entailed in the different bidding strategies and to explore
solutions for the purpose of minimising risks. The research employs semi-structured interviews and a
questionnaire survey which was administered to quantity surveying professionals with vast experience
in the construction tendering process. Content analysis is used to analyse the qualitative data while
statistical measures are used to analyse the quantitative data.
The results of the survey reveal that contractors use bidding strategies mainly for survival purposes that
ensure continuous and sufficient work. However, in each bidding activity, their primary objective is a
target return on the investment. In addition, fifteen bidding strategies are identified with their allied risk
factors. These bidding strategies are ranked according to the risk significance which yields ‘Bidding for
repetitive jobs’ as the one carrying the lowest risk while ‘Intuitive manipulation’ ranks as the one
carrying the highest risk. The study offers a conceptual model that lists methods to minimise the risks of
each bidding strategy which provides guidance for contractors to select better-suited bidding strategy
rather than random or haphazard selection. Moreover, since some contractors may opt for a risk
favourable approach in order to get a high return, the study examines the different risk perspectives of
contractors so that they may adopt such bidding strategies with full knowledge of the attendant risks
and what strategies are available to minimise risk exposure.
Citation:
Rasanthi, H.L.S., Disaratna, P.A.P.V.D.S., Perera, B.A.K.S., Perera, K.T.P.K. (2014). Risk of using bidding strategies for a contractor. In Y.G. Sandanayake, N.G. Fernando & G.I. Karunasena (Eds.), Sustainability and development in built environment: the way forward (pp.490-502). Ceylon Institute of Builders. https://ciobwcs.com/downloads/WCS2014-Proceedings.pdf