The effect of client and type and size of construction work on a contractor's bidding strategy

Abstract

This paper offers a bidding strategy model for use by contractors as part of a more informed approach in selecting which contracts to bid for, and as a basis for determining the most appropriate mark-up level for various types and sizes of construction work and client types. Regression analysis is used in measuring a contractor’s competitiveness between bids (by using the lowest bid / own bid ratio) and within bids (by using the lowest bid / cost estimate ratio) according to type and size of construction work and client type. The model was tested on a large and reputable Hong Kong contractor. This particular contractor's bidding behaviour was found to be largely unaffected by type of construction work but significantly affected by client type and size of construction work. Three quadratic models (regressing lowest bid / cost estimate on size of construction work) are also successfully developed for projects from the private sector, the Hong Kong Government and the Hong Kong Housing Authority respectively.