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Article

Morteza Shokri-Ghasabeh and Nicholas Chileshe

The purpose of this study is to investigate and rank the critical factors influencing the bid/no bid criteria and their importance in the Australian construction industry.

Abstract

Purpose

The purpose of this study is to investigate and rank the critical factors influencing the bid/no bid criteria and their importance in the Australian construction industry.

Design/methodology/approach

The research study has been undertaken by conducting an extensive literature review on bid/no bid decision-making criteria. As a result, the researchers identified 26 most common bid/no bid decision-making criteria that are accordingly grouped into five distinct categories, namely, “project”, “market”,“contractor”, “client” and “contract”. The literature review was followed by a national survey that was designed and utilised by the researchers to collect data for this purpose. The survey was sent to potential 450 Australian construction companies in various locations and responses were received from 81 Australian construction companies. Response data were subjected to descriptive and inferential statistics. Kruskal Wallis one-way analysis of variance (ANOVA) was applied to detect significant differences between the mean score grouped according to the organisation size (contract value).

Findings

The descriptive and empirical analysis demonstrated a disparity of ranking of the 26 bid/no bid criteria factors among the groups; however no statistically significant differences among the 26 bid/no criteria factors despite the absolute differences in the rankings and mean scores in the following four factors: (1) “bidding condition”, (2) “strength/weaknesses”, (3) “contract payment terms” and (4) “number of competitors/bidders”. Based on the overall sample, the highly ranked four factors were “client financial capability”, “project risk”, “project future benefits and profitability” and “number of competitors/bidders”. The following were the least ranked: “contractors’ financial situation”, “project duration” and “contractors’ material availability”. “Client financial capability”and “project risk” were jointly ranked as the most important by large, whereas “client financial capability” was also rated highly for smaller Australian construction contractors (ACCs). The medium ACCs had “project risk”as highly ranked.

Research limitations

The majority of the participants were small construction contractors in Australia. The reason is that the researchers were not aware of the contractors’ size prior to inviting them for participation in the research study. Second, the findings may not generalise to other industries or to organisations operating in other countries.

Practical implications

The identified “bid/no bid criteria” increase the awareness of existing decision-making practices and play a critical role in the future decisions of the construction companies, where decision makers need to evaluate the next opportunities encountered. Furthermore, knowledge and possession of these identified “bid/no bid” criteria would enable contractors to select a project with a higher probability of success in the future, which will accordingly result in long-term financial benefits and higher performance. Finally, the awareness of these factors could contribute to changing the contractor’s behaviours when bidding in a competitive environment or market conditions.

Originality/value

The study contributes to the body of knowledge on tendering and bidding practices among contractors in Australia, an area previously under explored. Second, this study provides some insights on the factors influencing the bid/no bid decisions among the ACCs.

Details

Construction Innovation, vol. 16 no. 2
Type: Research Article
ISSN: 1471-4175

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Article

Yong Qiang Chen, Su Juan Zhang, Li Sha Liu and Jia Hu

Making the right bid/no-bid decision is critical to the success and development of construction contracting enterprises. Decision makers’ personal characteristics, such as…

Abstract

Purpose

Making the right bid/no-bid decision is critical to the success and development of construction contracting enterprises. Decision makers’ personal characteristics, such as risk perception and propensity, have great impact on bid/no-bid decisions, which is the major concern of this research. The purpose of this paper is to explore the relationship among decision makers’ risk perception, risk propensity, and their bid/no-bid decision making of construction projects, as well as the factors influencing the risk perception and propensity.

Design/methodology/approach

In total, four hypotheses were proposed based on an extensive literature review. Experimental questionnaires were distributed to employees working in Chinese construction contracting enterprises with knowledge of construction bidding, and 134 valid questionnaires were obtained. Multivariate statistical analysis through SPSS 19.0 was used to analyze the acquired data.

Findings

Data analysis shows that in the context of international construction contracting: risk perception has a negative influence on bid/no-bid decision making; while risk propensity produces a positive influence and the probability and magnitude of potential gain or loss both have significant impacts on risk perception, and the probability plays a more important role.

Originality/value

This research studied the bid/no-bid decision making of construction projects from the new perspectives of risk perception and risk propensity of the decision makers.

Details

Engineering, Construction and Architectural Management, vol. 22 no. 1
Type: Research Article
ISSN: 0969-9988

Keywords

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Article

Guanghua Li, Chuan Chen, Guomin Zhang and Igor Martek

Factors affecting bid/no-bid decisions of international projects are more complex than those of domestic projects. The purpose of this paper is to identify and rank…

Abstract

Purpose

Factors affecting bid/no-bid decisions of international projects are more complex than those of domestic projects. The purpose of this paper is to identify and rank decision factors considered by variously sized Chinese international contractors (CICs) and categorize those groups of factors important to experienced practitioners.

Design/methodology/approach

The analysis of factors identified by a literature review is conducted based on data derived from questionnaire results received from 119 CIC project and bidding managers. The relative importance of factors is measured by mean value and standard deviation. The discrepancy in rank and importance value perceived by variously sized CICs are explored by ranking disparity analysis, non-parametric test and Spearman’s rank correlation coefficient test. Finally, factor analysis is used to categorize the underlying groups of factors considered by CICs.

Findings

In sum, 41 factors are identified through the literature review as having an impact on the bid decision. Significant disparities in ranking and importance are found in several factors, which partially affect the consistency of the ranking of factors perceived between large and small-medium CICs. Ultimately, nine major factors are identified as impacting the bidding decision, with “contractor’s capability” and “country risk of the host country,” being the most important.

Research limitations/implications

The weight of a factor considered in a decision varies across contractors as a function of contractor size. Whether using models or subjective judgment in making decisions, it is beneficial to fully understand the main groups of factors influencing the decision. Vulnerability to country risk emerges as the first criterion accessed in the bid decision.

Originality/value

A comprehensive set of factors is established for CICs, including both general factors common to domestic projects, and international factors unique to international projects. All factors are grouped by inferential analysis from the perspective of contractors, which reveals the underlying mechanism of the bid decision-making process. While the data were collected from CICs, the methodology in exploring factors, along with implications, is determined to be applicable internationally.

Details

Engineering, Construction and Architectural Management, vol. 27 no. 7
Type: Research Article
ISSN: 0969-9988

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Article

Mohamed Marzouk and Emad Mohamed

Decisions by construction contractors to bid (or not to bid) require the thorough assessment and evaluation of factors relevant to the decision, as well as the…

Abstract

Purpose

Decisions by construction contractors to bid (or not to bid) require the thorough assessment and evaluation of factors relevant to the decision, as well as the quantification of their combined impact, to produce successful bid/no-bid decisions. The purpose of this study is to present a fuzzy fault tree model to assist construction contractors to more efficiently bid for future projects.

Design/methodology/Approach

The proposed model consist of two stages: first, identification of the factors that affect bidding decision using a questionnaire survey after an extensive literature review, and second, usage of the identified factors to build a fuzzy fault tree model to simulate the bidding decision.

Findings

A list of 15 factors that affect bid/no-bid decisions was identified. Analysis of factors revealed that the highest-ranking factors were related to financial aspects of the project. A case study is presented to demonstrate the capabilities of the model, and a fuzzy important analysis is performed on the basic events to demonstrate the differences between three contractors’ bid/no-bid decisions. The results reveal that there is variation between the decisions of each contractor based on their willingness to participate. Besides, the influence of evaluation factors on the final decision for each contractor is different.

Originality/value

The study contributes to the body of knowledge on tendering and bidding practices. The proposed model incorporated the fuzzy set theory, which suits human subjectivity. The proposed methodology overcomes the limitations of previous models as it can, using the linear pool opinion principle, combine and weigh the evaluations of multiple experts. In addition, the model is convenient for situations where historical data are not available.

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Article

Nicholas Chileshe, Neema Kavishe and David John Edwards

This study aims to investigate and ranks the critical factors influencing the bid or no-bid decision and their importance for the indigenous small building contractors…

Abstract

Purpose

This study aims to investigate and ranks the critical factors influencing the bid or no-bid decision and their importance for the indigenous small building contractors within the Tanzanian construction industry.

Design/methodology/approach

An interpretivist epistemological design was adopted to extensively manually review and search extant literature on bid or no-bid decision-making criteria. A total of 30 most common bid or no-bid decision-making criteria were identified. These were included in a questionnaire survey data collection instrument. The survey was distributed to 40 small indigenous (local) building contractors in Dar es Salaam, Tanzania. In total, 33 responses were received. Response data was subjected to both descriptive and inferential statistics.

Findings

The results show a disparity of ranking of the 30 bid/no-bid criteria factors among the two grades of small contractors, with 11 factors having statistically significant differences (p = < 0.05). Based on the overall sample, the most highly ranked seven factors in ascending order were: availability of capital; financial capacity of the client; project size; profitability; project type; need of work; and current workload. The following were the least ranked: tax liability; the degree of safety; availability of other projects; availability of labor; bidding document price; and uncertainty because of weather conditions. Availability of capital and financial capacity of the client were jointly ranked as the most important by Class VI contractors. In comparison, availability of capital and need of study were rated highly for Class VII contractors.

Research limitations/implications

The sample consisted of indigenous small building contractors in one industry operating in Tanzania only and did not include the perceptions of the foreign contractors based in Dar es Salaam. Future studies are required to expand the current research and investigate this specific aspect further.

Practical implications

The identified “bid/no-bid criteria” information will allow indigenous small building contractors to enhance the efficiency and effectiveness of their bidding decision-making process. Emergent findings will enable said contractors to: better fit into the competitive construction business environment; increase their awareness of existing decision-making practices; and develop appropriate strategies for evaluation of opportunities encountered. Cumulatively, these findings benefit small indigenous building contractors by increasing their understanding of the factors influencing bid decision.

Originality/value

The study represents the first empirical study in Tanzania on the critical factors influencing the bid or no-bid decision among the indigenous small building contractors, which face fierce competition from foreign contractors.

Details

Construction Innovation , vol. 21 no. 2
Type: Research Article
ISSN: 1471-4175

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Article

Adnan Enshassi, Sherif Mohamed and Ala'a El Karriri

The purpose of this paper is to identify and rank the factors that affect the bid/no bid decision according to their relative importance from the perspective of the…

Abstract

Purpose

The purpose of this paper is to identify and rank the factors that affect the bid/no bid decision according to their relative importance from the perspective of the contracting parties operating in the Gaza Strip, Palestine.

Design/methodology/approach

The objectives of this research were investigated through a postal questionnaire, which covered a randomly selected sample of 63 contractors, 29 clients and 13 consultants operating in the construction industry in the Gaza strip. The questionnaire was structured based on related literature, the pilot study and actual factors affecting bidders' decisions to bid or not that arise from special conditions in the Gaza Strip. A total of 78 factors that affect the bid/no bid decision were identified. These factors were then ranked according to their relative importance to contracting parties operating in the Gaza Strip, Palestine.

Findings

The results illustrate that the financial capability of the contractors, the financial capability of the clients, the financial values of the project, the due date of the payments, the availability of construction raw materials in local markets, and the stability of the construction industry were the most critical factors affecting the bid/no bid decision, as agreed by all respondents.

Originality/value

The paper provides supportive practical solutions for contractors, clients and consultants to enhance and improve bidding decisions. It is recommended that clients and consultants consider the financial capabilities, technical capabilities and staff competencies of the contractors during the awarding stage, and not simply focus on the lowest bid.

Details

Journal of Financial Management of Property and Construction, vol. 15 no. 2
Type: Research Article
ISSN: 1366-4387

Keywords

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Article

Oluwole Alfred Olatunji, Olaniyi Isaac Aje and Sina Makanjuola

The decision to bid or not to bid for new projects determines contractors’ propensity for business success or failure. The purpose of this paper is to investigate the…

Abstract

Purpose

The decision to bid or not to bid for new projects determines contractors’ propensity for business success or failure. The purpose of this paper is to investigate the factors that affect the decision of indigenous construction contractors to bid or not to bid in Nigeria.

Design/methodology/approach

Analysis was conducted on data from questionnaires received from 64 engineering management employees of leading construction companies which are members of Nigeria’s Federation of Construction Industry. The study identified 41 significant decision factors often considered by Nigerian indigenous contractors before the bid. Mean item scores were obtained for each of the factors. Principal component analysis was used to point out the most significant decision factors.

Findings

Results revealed significant orthogonal relationships between the factors. Only 11 of the 41 factors are statistically significant to influence contractors’ decision to bid or not to bid. Most of the significant items were amongst the least rated items by the participants. The post hoc decision factors include consultant’s interpretation of project specifications, previous relationship between the intending bidder and client, availability of other projects at the time of bidding, technological complexity of the project under consideration and prequalification requirements. Others include the propensity for resource price fluctuation, business capacity of partners, amount of own work vs subcontracted work, required rate of return on investment and difficulty in obtaining finance.

Originality/value

The practical implication of these findings are as follows: the orthogonal relationship between the decision factors implies non-linear relationship between the factors and actual decision to bid or not to bid, and that bid success is often not predictable by bid behaviour; many of the bid decision factors rated highest by indigenous contractors seldom impact the contractors’ actual bid decisions; local and international players can adopt the significant decision factors elicited in this study for managing their structures for inter-organizational partnerships.

Details

Engineering, Construction and Architectural Management, vol. 24 no. 3
Type: Research Article
ISSN: 0969-9988

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Article

Yong‐tao Tan, Li‐yin Shen, Craig Langston and Yan Liu

The purpose of this paper is to introduce a quantitative method for assisting contractors to select appropriate projects for bidding by considering multiple attributes and…

Abstract

Purpose

The purpose of this paper is to introduce a quantitative method for assisting contractors to select appropriate projects for bidding by considering multiple attributes and integrating decision group member opinions.

Design/methodology/approach

The fuzzy technique for order preference by similarity to ideal solution (TOPSIS) method is used to help contractors make decision on project selection and the linguistic terms are defined for representing the triangular fuzzy numbers for ratings of alternatives and weights of criteria.

Findings

The selection of appropriate projects for bidding is a multiple attribute group decision‐making exercise. In a real decision process, there are many uncertainties and ambiguities, and time limitations mean that decision makers cannot always make precise judgments. The numerical example demonstrates that the fuzzy TOPSIS approach can be used to simulate the decision process in project selection, and the results provide contractors with valuable insight into the project selection problem.

Originality/value

Selecting appropriate projects for bidding is to use a contractor's limited resources more efficiently and increase the probability of winning contracts. Therefore, there is a need for a quantitative method to help contractors make better decision on project selection. That leads to the formulation of this paper. The fuzzy TOPSIS method can assist contractors to make better decisions in bidding.

Details

Journal of Modelling in Management, vol. 5 no. 3
Type: Research Article
ISSN: 1746-5664

Keywords

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Article

Aki Pekuri, Laura Pekuri and Harri Haapasalo

The purpose of this study is to investigate project selection in the context of business management with the specific aim of understanding the role of business models in…

Abstract

Purpose

The purpose of this study is to investigate project selection in the context of business management with the specific aim of understanding the role of business models in project selection. The logic followed for making decisions and selecting projects significantly influences construction companies’ success.

Design/methodology/approach

The research objective is pursued by conducting a multiple-case study. Managers acting in key decision-making roles from eight construction companies are interviewed. A conceptual framework is developed for analysing the interview data and the prevailing project selection practices in construction.

Findings

The findings suggest that project selection is not guided by any specific business model, but that the decision-making process is dominated more by short-term factors such as need of work and profitability. Thus, estimation know-how largely determines the kind of projects companies are willing to consider, regardless of their competence to deliver them.

Research limitations/implications

The study produces a hypothesis that ignorance of business models in project selection and their general underutilisation in management have negative effects on performance of the construction industry. More consistent management practice would enable the development of business models and processes, contributing to performance and help companies to distinguish themselves from each other.

Originality/value

As opposed to previous studies that have produced bidding models that emulate the current industry practices, this research analyses the prevailing logic of project selection from a more critical perspective. In addition, the project selection practices of Finnish construction companies have not been investigated previously.

Details

Construction Innovation, vol. 15 no. 2
Type: Research Article
ISSN: 1471-4175

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Article

Jongsoo Choi

The purpose of this paper is to examine the stock market reactions at the time of new construction contract winning announcements to explore whether the managements made…

Abstract

Purpose

The purpose of this paper is to examine the stock market reactions at the time of new construction contract winning announcements to explore whether the managements made wise bidding decisions and thus create values.

Design/methodology/approach

A total of 813 new contracts awarded to publicly traded US construction firms for the years 2000 through 2009 are screened and these are analyzed by applying event study methodology. This paper estimates the effect of an event on stock market’s responses, using cumulative abnormal returns (CARs), and the CAR values are estimated for four types of windows: days 0 (i.e. the day of the event announcement), (−1, +1), (−2, +2), and (−3, +3). The market responses are further subdivided according to such variables as the project type, owner type, project location, work scope, and bidder size.

Findings

The results of this study show that the stock market did not curse contract winners by positively responding to the announcements of new contract awards. The sample firms’ market value, on average, is increased by 1.168 percent during the seven-day window period, and is highly significant. In addition, the followings are observed: first, the stock market tends to favor larger contracts over smaller ones; second, small firms’ events receive better market responses than those of large ones; and third, the level of returns varies considerably across the project types. Meanwhile, no statistical differences are observed in CARs for the owner type, work scope, and project location variables.

Research limitations/implications

This study has several limitations. First, potential factors that may have effects on CAR could not be incorporated in the analysis, because a contract award announcement provides only limited information. Second, the level of consistency between stock market responses and the contract’s actual outcomes could not be assessed.

Practical implications

Wise bidding decision has critical implication considering the impact of a new contract award on a firm; a new contract increases the backlog of a firm while it may harm/improve the operating performance or decrease/increase the stockholders’ wealth. Although the overall success level of the current sample, in terms of CARs, is positive and significant, CAR values vary significantly depending on the window period and/or variables. Therefore, managements should exercise careful discretion in selecting a target project and arriving at a bidding decision.

Originality/value

While event study has been widespread for assessing the effect of numerous event types, project award received scarcely any attention. Moreover, it has widely been believed that cost/pricing and contract value are the primary sources for winners’ curse argument. Accordingly, this study can be considered as a seminal work assessing stock market responses to validate winners’ curse argument. This study contributes to the body of knowledge of decision-making discipline. In addition, from a strategic management perspective, the evidence and implications drawn from the analysis results will be valuable resources for bid or no-bid decision making in the project-based industry.

Details

Management Decision, vol. 53 no. 6
Type: Research Article
ISSN: 0025-1747

Keywords

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