Analytical Model for Analyzing Construction Claims and Opportunistic Bidding

Abstract

Construction claims are considered by many project participants to be one of the most disruptive and unpleasant events of a project. Construction claims occur for various reasons. There is a need to understand the dynamic nature between construction claims and opportunistic bidding. An analytical model, the Claims Decision Model ͑CDM͒, based on ''game theory,'' was developed to study opportunistic bidding and construction claims. This model explains ͑1͒ how people behave during a potential or existing claiming situation, ͑2͒ how different claiming situations are related to opportunistic bidding behavior, and ͑3͒ what situations encourage or discourage opportunistic behavior. The results of this pilot study indicate that the equilibrium solution of a construction claim is to negotiate and settle, which concurs with most of the claim cases in the industry. The possible range of a negotiation settlement is obtained in this paper. The model provides the rationale for recent innovations to manage disputes. The model can also help project owners identify the possibility of opportunistic bidding, and can assist the project participants in analyzing construction claims.

Construction claims in United Arab Emirates: Types, causes, and frequency

“…Construction claims are considered by many project participants to be one of the most disruptive and unpleasant events of a project (Ho and Liu 2004). Today, construction projects are the subject of more claims than in any other time in history.…”

“…This has placed an added burden on contractors to construct increasingly sophisticated and risky projects with less resources and profits. Under these circumstances, it is not surprising that the number of claims within the construction industry continues to increase (Ho and Liu 2004). In the following subsections, an outline of the construction industry in United Arab Emirates is first presented followed by a brief discussion on the types and causes of claims in construction projects.…”

A model of discrete zero-sum two-person matrix games with grey numbers to solve dispute resolution problems in construction

“…Ho and Liu (2004) proposed a unique game theoretic model for opportunistic bidding. Also, Ahmed et al (2016) studied the winner's curse; a situation may happen for a contractor with winner bid.…”

A game theory perspective on product development project charters: the project manager - project sponsor relationship as an iterated Prisoner's Dilemma

“…Six articles published in the Journal of Construction Engineering and Management employed game theory to examine opportunistic bidding (Ho and Liu, 2004), motivating trust in construction partnerships (Wong, 2005), the intervention decision of a government to rescue a failing infrastructure project in a public-private partnership (Ho, 2006), negotiating concession periods (Shen et al, 2007), agent-based models of temporary project teams (Son and Rojas, 2011), and review the research on public-private partnerships (Yongjian et al, 2009). The remaining five articles were each published in different journals.…”