A Grading System-based Model for Detecting Unbalanced Bids during the Tendering Process

Abstract

Unbalanced bidding is a common practice used in both unit price and lump sum contracts. Contractors may unbalance their bids in different forms for various reasons. The studies in the literature either focus on developing optimization models that assist contractors in winning contracts and maximizing profits of their bids through unbalancing or developing models that assist owners in detecting and/or preventing unbalanced bids during the bid evaluation stage. Unbalanced bidding is one of the most controversial subjects in the construction management literature and practice. Although there is no consensus on whether it is unethical or not, this practice is not usually for the benefit of owners. Therefore, owners have the right to reject the unbalanced bids and create a fair competition environment if they have a mechanism to detect it during the bid evaluation process. The main objective of this study is to propose a model, which consists of five different grading systems and helps owners in detecting unbalanced bids during the tendering process. In the proposed model, owners may either calculate the individual grades of each bidder or calculate the final score of each bidder by assigning different weights to these grading systems according to the project characteristics or their own needs. The final scores and bid prices of the contractors can be simultaneously evaluated. In order to demonstrate the applicability of the proposed model, an illustrative example is presented. It can be concluded that the proposed model can be effectively and easily used by owners for detecting unbalanced bids. This paper is the revised version of the paper that has been published in the proceedings of the Creative Construction Conference 2018 (Polat et al., 2018).

Detecting unbalanced bids via an improved grading-based model

“…An et al (2018) developed an unascertained model, which uses the owner's estimated price as evaluation criterion and identifies unbalanced bids. Polat et al (2019) proposed an unbalanced bid detection model, which contains five different grading systems and aims to assist owners in detecting unbalanced bids. The proposed model enables owners to calculate the individual grades of each bidder or calculate the final score of each bidder by assigning different weights to these grading systems according to the project characteristics or their own needs.…”

“…The objectives of this study include the following: (1) defining new grading systems to extend the existing approach in detection of unbalanced bids; and (2) validating the new grading systems through an illustrative example. In order to achieve these objectives, the model formerly developed by Polat et al (2019), which consisted of five grading systems, was modified by adding three new grading systems.…”

“…In the model of Polat et al (2019), the first grading system compares the ratio of each activity's total price in the bid price offered by each bidder with the one estimated by the owner, the second grading system compares the unit price of each activity offered by each bidder with the ones estimated by the owner, the third grading system compares the unit price of each activity offered by each bidder with the average of unit prices offered by all bidders, the fourth grading system compares the bid price offered by the bidder with the estimated construction cost (ECC), and the fifth grading system compares the sum of total prices offered by bidders for those activities whose quantities may likely increase during the construction phase with the ones estimated by the owner.…”

“…Studies in the construction management literature and practice regarding unbalanced bidding can be categorized into two groups: (1) the ones focusing on detecting or preventing this practice, aiming to help owners (e.g., Bell 1989;Wang 2004;Arditi and Chotibhongs 2009;Shrestha et al 2012;Hyari 2016;Hyari et al 2016;Nikpour et al 2017;An et al 2018;Polat et al 2019); and (2) the ones focusing on optimizing unbalanced bidding, which aim to help contractors (e.g., Yizhe and Youjie 1992;Nassar 2004;Son et al 2006;Cattell et al 2008;Christodoulou 2008;Liu et al 2009;Amiri 2010a, 2010b;Mandell and Nyström 2011;Cattell et al 2011;Bajari et al 2014).…”

“…This study deals with the detection of unbalanced bids created by quantity error exploitation in unit price contracts. For this purpose, after reviewing existing models in the literature, an advanced model for the detection of unbalanced bids is proposed by improving the model formerly developed by Polat et al (2019). The proposed model uses eight different grading systems for detection of unbalanced bids, whereas the previous model consisted of five grading systems.…”