Wang, W C (2002) Sim-utility: Model for project ceiling price determination. Journal of Construction Engineering and Management, 128(1), pp. 76-84. ISSN 0733-9364
Abstract
Before considering bids submitted by competing contractors for a public procurement project, the owner should determine a project ceiling price or cost estimate to use as a reference point for evaluating the bids. A high ceiling price conflicts with the owner's interests in minimizing costs. Meanwhile, a low ceiling price can jeopardize the project if all bids exceed the ceiling price. This paper proposes a model for determining a reasonable project ceiling price. The model, called SIM-UTILITY, is based on a utility theory and facilitated by a cost simulation approach. The utility theory is applied to reflect the owner's preferences regarding the determination criteria, while the simulation approach is used to generate more objective project cost data to support execution of the utility theory. The advantages of SIM-UTILITY are proven by its successful application to three construction projects in Taiwan. A computerized SIM-UTILITY is expected to be broadly applicable to public construction projects in Taiwan.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bids; cost estimates; pricing; project management; utility theory |
| Index terms: | public construction, project management, cost estimate, pricing, price determination, owner, construction project, preference, Taiwan, project cost, utility theory |
| Subjects: | economic analysis, financial and cost management, project management theory and practice, Geography, production management, tendering, economics, decision-making and reasoning, economic theory, sociology, building construction |
| Topics: | Stakeholder Management, Procurement, Cost Management, Business Strategy, Project Management, Geographical Context, Research Practice, Engineering Principles |
| Descriptive scope: | 3 PCT |
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