Triangular distribution and PERT method vs. payoff matrix for decision-making support in risk analysis of construction bidding: A case study

Abstract

Decision-making in construction bidding represents a complex process due to the present risk. Risk or uncertainty cannot be ignored and should be treated as a constituent of decision-making. The paper aims to emphasize the importance of probability theory by comparing insufficiently applicable methods in practical bidding. The triangular distribution and the PERT method belong to three-point estimate techniques, while payoff matrices represent a multi-criteria approach. Also, selected methods belong to quantitative techniques for risk cost analysis. Still, the risk costs determination of the unit costs and the total costs of bids is often based on an intuitive approach. Therefore, compared results of the triangular distribution, PERT method, and payoff matrix techniques (minimin, minimax, expected monetary value, and expected opportunity loss) indicate the significance of risk costs estimating in tendering. The analysis of the results showed some overlaps in risk costs values obtained by the PERT method and expected monetary value technique. Those are due to the specificity of the chosen practical example and cannot be adopted as a rule. This means that selected methods and techniques are very useful for all bid estimation. The paper proved the complexity of decision-making, where the primary goal is to award a contract.

Construction Work Efficiency Analysis—Application of Probabilistic Approach and Machine Learning for Formworks Assembly

“…To provide examples of how the triangular distribution is used in engineering, some applications are mentioned in this paper: analysing and examining cost estimates for electrical services contracts in government clinics in Hong Kong [34], deriving the occurrence probabilities of major construction project risk factors for proactive scheduling [35], estimating the duration of horizontal directional drilling works [36], assessing the duration of construction works, such as finishing plastering [37], estimating the duration of construction tasks for project evaluation and review techniques (PERT) [38], and analysing construction cost risk for practical application in the bidding process [39].…”