Towner, M and Baccarini, D (2008) Risk pricing in construction tenders: how, who, what. Construction Economics and Building, 8(1), pp. 49-60. ISSN 2204-9029
Abstract
Construction projects are most commonlyprocured in Australia by means of a traditionaldesign–tender–build model, whereby design islargely completed then contractors submittenders in a competitive environment.Construction contractors must consider riskswithin their tenders. This paper reports theresearch findings into pricing for risk incompetitive tenders by constructioncontractors. The research is based onstructured interviews with 10 contractingpersonnel; supplemented by 23 responses ofconstruction personnel from an online survey.Two common methods to price for risk are atrade-by-trade basis or an overall percentageor lump sum addition to the base estimate.Experience and intuition plays a significant rolein pricing for risk in tenders and the numberand type of people involved varies with projectsize, with greater involvement as project sizeincreases. The most significant risks priced intenders were: availability of resources; designor documentation errors; incomplete design;buildability issues; and inclement weather. Themost significant project factors considered bycontractors when pricing for risk in tenders are:value of liquidated damages; type ofcontract/procurement; completeness ofdocumentation; project complexity; and currentworkload. These risks and project factors areprimarily those over which the contractor haslimited or no control.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction; risk; tendering |
| Index terms: | personnel, interview, construction project, pricing, buildability, construction contractor, estimate, project complexity, weather, documentation, liquidated damages, intuition, Australia, survey |
| Subjects: | design efficiency, financial and cost management, economic analysis, cognitive psychology, production management, organizational theory, Geography, contractual remedy, professional development, practitioner, data collection methods, management, air quality |
| Topics: | Research Practice, Geographical Context, Project Management, Information Management, Cost Management, Business Strategy, Sustainability, Roles and Professions, Human Resources, Design Practice, Contract Administration |
| Descriptive scope: | 3 PCE |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here