The effect of competition on bid quality and final results on state dot projects

The study’s objective was to determine if competition during bidding directly affects the end results for State DOT projects. Competition was measured as the number of bidders per bid, and end results were measured as cost overrun and time delay percentages at project completion. State DOTs use a recursive bidding process, a standard project management practice, and they record and archive results in a similar fashion, all according to FHWA regulations. There is therefore a well-built data set for both bid results and final project outcomes which is made available to the public, on-line, by several State DOTs. By accessing public websites, data from five of those State DOTs was utilized in the study, which contained 2,457 certified bid results and 1,040 project outcomes. Two statistical models were developed using Multinomial Logit Regression (MLR) and Three Stage Least Squares Regression (3SLS) techniques. The MLR model was developed to provide estimates of the relative importance of bid-phase competition in predicting bid quality. The results showed that the likelihood of achieving an acceptable, versus an unfavorable bid result, was increased by 4. 9x with each additional bidder per bid. The 3SLS model was developed to assess the influence of bid phase competition on project cost overruns and time delays. The results showed that each additional bidder per bid resulted in a 2. 2 percent reduction in project cost overruns. Both results are significant, as the models showed that as competition increases, the probability of high quality bids and better project outcomes is enhanced. Based on these results, it is recommended that State DOTs consider the existing competitive environment before implementing alternative project delivery methods like Design-Build, or procurement strategies such as Project Labor Agreements, which artificially limit competition.