Comparison of Various Competitive Bidding Methods from an Owner’s Perspective
In the construction industry, it is crucial for owners to select the appropriate contract delivery method in order to achieve best performance on their projects. The low bid method has been the most common competitive bid selection approach used for public projects in the U.S. construction industry. Although the latter method ensures transparency in the selection process through considering only one objective criterion which is the bid price, it often leads to adversarial relationships, less cooperation among different parties involved in the project, and potential compromise on the project quality. Furthermore, it is often accompanied with a significant number of claims and disputes that often result in cost overruns and schedule delays. Thus, there is a need to explore alternative competitive price-driven bidding methods which can preserve the transparency of the low bid method and at the same time remedy the inconvenience of unrealistic low bids. This paper uses agent based modelling in order to simulate the interactions among contractors with varying risk behavior under different competitive tendering approaches including the second low, average, and below-average bidding methods. The conducted simulations revealed that under low competition, the below-average bid method is recommended to owners whereas the second low bid method is more adequate under high competition. The developed platform allows the observation of emergent market patterns such as the evolution of bid prices and capital growth of contractors under each of the simulated bidding methods, which helps owners choose the most suitable method for their current project and market conditions.