Ho, S P (2005) Bid compensation decision model for projects with costly bid preparation. Journal of Construction Engineering and Management, 131(2), pp. 151-159. ISSN 0733-9364
Abstract
For projects with high bid preparation cost, it is often suggested that the owner should consider paying bid compensation to the most highly ranked unsuccessful bidders to stimulate extra effort or inputs in bid preparation. Whereas the underlying idea of using bid compensation is intuitively sound, there is no theoretical basis or empirical evidence for such suggestion. Because costly bid preparation often implies a larger project scale, the issue of bid compensation strategy is important to practitioners and an interest of study. This paper aims to study the impacts of bid compensation and to develop appropriate bid compensation strategies. Game theory is applied to analyze the behavioral dynamics between competing bidders and project owners. A bid compensation model based on game theoretic analysis is developed in this study. The model provides equilibrium solutions under bid compensation, quantitative formula, and qualitative implications for the formation of bid compensation strategies.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bids; build/operate/transfer: contracts; decision making; design/build; project management |
| Index terms: | strategy, practitioner, project management, compensation, game theory, bid preparation, bidder, owner, dynamics, evidence, decision-making |
| Subjects: | dispute resolution, systems engineering, project management theory and practice, evaluation and assessment methods, practitioner, sociology, decision analysis, decision models, management, bidding |
| Topics: | Legal Issues, Project Management, Stakeholder Management, Business Strategy, Engineering Principles, Research Practice, Risk Management, Roles and Professions, Procurement |
| Descriptive scope: | 4 PCTA |
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