Bidding strategy: Multicriteria decision-making approach

Selection of a reasonable markup, while bidding on a job, is the result of a complex decision making process. The problem is identified as an integration of two different aspects: (1) Prediction of uncertainties, and (2) Evaluation of consequences. In comparison with the voluminous literature on the uncertainty side little has been written about the value or preference side of the picture. This project attempts to study the problems of the decision making process in a competitive bidding situation, concentrating on formalizing the preference structure. The main purpose of this project is to develop methods in order to arrive at a reasonable decision out of numerous objectives in a multicriteria setting of the problem. The final objective of the project is building an expert system that utilizes the multicriteria decision making model as its expert knowledge base. This expert system would assist the bidder in choosing among alternatives, so that the final choice is consistent with the underlying preference structure. The research was carried out in three distinct but interrelated phases. First, a questionnaire survey was conducted among the general contractors of the United States of America. This was done to identify the factors affecting bid decisions. Two distinct stages of the bidding decision making process were studied separately: (1) Bid/no-bid decision and (2) Percent markup decision. It was found that factors affecting the bid/no-bid decisions were primarily of "certain" nature and those affecting percent markup decision were predominantly of "uncertain" nature. Accordingly, in the second phase, a deterministic worth evaluation model for the bid/no-bid decision and a probabilistic utility model for the percent markup decision were developed. In the third phase, these models were implemented in an expert system using a commercially available rule-based expert system building tool.