Simulating and comparing various price-driven bid selection methods from an owner's perspective. (c2017)

Abstract

In the construction industry, it is crucial for owners to select the appropriate contract delivery method in order to achieve best performance on their projects. The low bid method has been the most common competitive bid selection approach used for public projects in the U.S. construction industry and worldwide. Although the latter method ensures transparency in the selection process through considering only one objective criterion which is the bid price, it often leads to adversarial relationships, less cooperation among different parties involved in the project, and potential compromise on the project quality. Furthermore, it is often accompanied with a significant number of claims and disputes that often result in cost overruns and schedule delays. Thus, there is a need to explore alternative competitive price-driven bidding methods which can preserve the transparency of the low bid method and at the same time remedy the inconvenience of unrealistic low bids. This thesis uses agent based modeling in order to simulate the interactions among contractors with varying risk behavior and project management skill levels under different competitive tendering approaches including the second low, average, below-average, truncated average and truncated below-average bidding methods. This platform allows the observation of emergent market patterns with regard to the evolution of bid prices under each of the simulated tendering approaches, which helps owners choose the most suitable tendering method for their current project and the existing market conditions.