Drew, D S; Shen, L Y and Zou, P X W (2002) Developing an optimal bidding strategy in two-envelope fee bidding. Construction Management and Economics, 20(7), pp. 611-620. ISSN 01446193
Abstract
Two-envelope fee bidding is used frequently in allocating commissions to willing consultants such as architects, engineers and surveyors. Consultant fees and technical scores are normally aggregated to form a total score. The consultant obtaining the highest total score is usually awarded the commission. The consultant's objective is to get the highest total score possible because this maximizes the chance of winning. Consultants can submit to the procurer any of a number of different technical proposals which is then converted to a technical score. Only one technical score+fee combination will result in the highest total score, i.e. the optimum technical score+fee combination. This paper offers consultants an approach to better identify their optimum technical score+fee combination. In using this approach consultants need to develop a total score continuum based on (1) the consultant's original technical proposal and fee, (2) the absolute lowest fee and corresponding technical score, and (3) the absolute highest technical score and corresponding fee. The total score becomes the dependent variable and the fee the independent variable. Since the total score continuum is regressed on three points it will almost certainly be curvilinear in shape. Given that the optimum total score is at the highest point of the continuum, the optimum fee can be determined through differentiation. The corresponding technical score can then be found. After adjusting the original technical proposal to reflect the corresponding technical score, the optimum fee and adjusted technical proposal can then be submitted to the procurer.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bidding; consultant; fee; strategy; technical score; tendering; two-envelope |
| Index terms: | engineer, independent variable, fee bidding, architect, strategy, proposal, differentiation, bidding, dependent variable |
| Subjects: | project planning, bidding, organization, profession, statistical analysis, management |
| Topics: | Organizational Design, Roles and Professions, Procurement, Business Strategy, Project Management, Research Practice |
| Descriptive scope: | 3 PCA |
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