Ballesteros-Pérez, P; Skitmore, M; Cerezo-Narváez, A; González-Cruz, M C; Pastor-Fernández, A and Otero-Mateo, M (2021) Standard deviation of bids for construction contract auctions. Journal of Construction Engineering and Management, 147(8): 04021096, ISSN 0733-9364
Abstract
Previous research has confirmed that the distribution of bids for construction auctions can be reasonably modeled with Lognormal distribution. The location parameter of this distribution (the mean μ) has been found to have a good linear correlation with the bidders' cost estimates. However, the scale parameter (standard deviation of the bids, σ) remains noticeably difficult to anticipate. By analyzing 13 construction auction datasets, hard evidence is provided that the high variability of σ observed in construction auctions is mostly due to sample size (number of bids per auction). Moreover, we show that the coefficient of variation (σ/μ) of log-transformed bids follows the same χ2 distribution in uncapped auctions. This means the σ′s population value in similar auctions is nearly proportional to μ provided the bid price is not upper limited. Other findings are that more frequent bidders do not tend to bid lower, but their dispersion is narrower than sporadic bidders. These findings allow the introduction of important simplifications in construction bidding models, especially when access to historical data is limited.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | auctions; bid forecasting; bid modelling; bids; construction contracts; dispersion; tendering |
| Index terms: | bidding, dataset, evidence, population, variation, variability, simplification, modelling, cost estimate, construction contract, bidder, deviation, sample size, forecasting |
| Subjects: | data management, demography, statistical analysis, management, contractual condition, prediction and forecasting, analytical methods, financial and cost management, bidding, research design and methodology, contract type, evaluation and assessment methods |
| Topics: | Contract Administration, Urban Studies, Digital Applications, Procurement, Cost Management, Business Strategy, Engineering Principles, Research Practice |
| Descriptive scope: | 3 PCA |
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