Bidding Decision Making for Construction Company Using a Multi-Criteria Prospect Model / Statybos Įmonės Apsisprendimas Dalyvauti Konkurse Naudojant Daugiakriterinį Perspektyvų Modelį

Abstract

Two critical decisions faced by bidders in competitive bidding include, firstly, whether or not to submit a bid, and secondly (if the answer to the first is ‘yes’) what markup value should be used on the submitted bid. In the construction industry, government agencies and private sector clients typically adopt competitive bidding to determine contract awards. Contractors also apply the same approach to bidding decisions. There are many variables that affect contractor decisions regarding whether to bid and the markup scale, which complicate the bidding decision process. This study proposes a Multi-Criteria Prospect Model for Bidding Decision (BD-MCPM) to assist contractors to make decisions on bid/no bid and markup scale. Key factors of influence that impact bidding decisions were identified first. Second, Fuzzy Preference Relations (FPR) was employed to assess factor weights and determine bid/no bid. Finally, if a decision to bid is given, then the Multi-Criteria Prospect Model (MCPM), which links Fuzzy Preference Relations (FPR) and Cumulative Prospect Theory (CPT), is deployed to determine the markup scale that best conforms to primary decision maker (PDM) preferences. The applicability of this model was demonstrated in a real case study. Santrauka Ketinantiems dalyvauti konkurse reikia priimti du lemiamus sprendimus: ar teikti pasiūlymą ir kokį antkainį nurodyti pasiūlyme. Statybų sektoriuje valstybės įstaigos ir klientai iš privačiojo sektoriaus paprastai konkursus skelbia siekdami išrinkti laimėtoją, su kuriuo pasirašoma sutartis. Rangovai sprendimus dalyvauti konkurse vertina taip pat. Rangovų apsisprendimą dalyvauti konkurse ir pasirinktą antkainį lemia ne vienas kintamasis, ir tai apsunkina apsisprendimo dalyvauti konkurse procesą. Šiame tyrime pristatomas daugiakriterinis perspektyvų modelis apsisprendimui dalyvauti konkurse (BD-MCPM), kuris rangovams padės apsispręsti, ar dalyvauti konkurse ir kokį antkainį pasirinkti. Pirmiausia buvo nustatyti pagrindiniai veiksniai, kurie daro įtaką apsisprendimui dalyvauti konkurse. Po to, naudojant neraiškiuosius prio- ritetinius ryšius (angl. Fuzzy Preference Relations, FPR), buvo įvertinti veiksnių reikšmingumai ir nustatyta, dalyvauti ar nedalyvauti konkurse. Pagaliau, jeigu nusprendžiama dalyvauti konkurse, naudojant daugiakriterinį perspektyvų modelį (MCPM), kuris neraiškiuosius prioritetinius ryšius susieja su kaupiamaja perspektyvos teorija (angl. Cumulative Prospect Theory, CPT), nustatomas antkainio lygis, kuris labiausiai atitinka pagrindinio sprendimus priimančio asmens pageidavimus. Praktinis šio modelio naudingumas pademonstruotas atliekant atvejo tyrimą.

Bidding Decision in Land Auction Using Prospect Theory

“…Cheng et al (2011) applied Fuzzy Preference Relations (FPR) and Cumulative Prospect Theory into bidding decision for construction company which is different from our paper, because we consider three situations that a bidder would encounter. Armantier and Treich (2009) interpreted overbidding in first-price auctions using probability weighting function.…”

“…The influential factors for construction company bidding decision have been studied by many researchers (Cheng et al 2011). Cheng et al (2011) gave a summary of 44 factors identified in the literature as affecting bid/no bid decision making for construction companies. And these factors were incorporated into a questionnaire and sent to the bidders.…”

“…The higher the score was, the more important the factor was felt by the bidder. Cheng et al (2011) conducted the survey and described those factors which have received average score of importance equal to or greater than 5 in Table 1. In China, the real estate companies would compete in land auctions which are launched by the government.…”

“…Cheng et al (2011) provided a summary on the most commonly used influential factors, such as the number of competitors, expected profitability, market condition, expected risk, experience in similar project. These factors can be divided into two categories, i.e., numerical factors and non-numerical factors.…”

Competition Rule of the Multi-Criteria Approach: What Contractors in China Really Want?

“…To further investigate the rationales behind markup decision of the contractors for different types of projects, Ye et al (2014) identified three main decision factors of markup: i) project nature; ii) client characteristic; and iii) market environment. Cheng et al (2011) integrated various approaches, including fuzzy preference relations, multi-criteria prospect model and cumulative prospect theory to develop a bidding decision model and provide optimal markup scale advices to contractors. Despite these efforts, a couple of issues remains unsolved in the construction industry: 1) Does it mean that contractors have no need to participate in the formulation of competitive bidding?…”