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Title: Investigating risky decisions of construction contractors in competitive bid mark-ups
Keywords: bid mark-ups, construction, prospect theory, one-reason decision model, taxonomy
Issue Date: 15-Jul-2010
Citation: BUDI HARTONO (2010-07-15). Investigating risky decisions of construction contractors in competitive bid mark-ups. ScholarBank@NUS Repository.
Abstract: The bid mark-up decision is considered important and complex from a construction contractor?s perspective. This study aims at examining contractors? risky bid mark-up decisions in a competitive bidding setting from a descriptive research school of thought. Grounded to Prospect Theory and One-Reason Decision Model, a contingency-based theoretical framework of three scenarios was developed to explain and to predict bid mark-up decisions in lights of four identified determinants, namely: perceived 'rate of returns', 'revenues', 'project backlogs', and 'project strategic importance'. The three scenarios according to this framework were verified by means of a self-administered survey in Singapore construction industry. By using taxonomic approach, five groups of bidders with distinctive bid profiles were identified and the associated bid mark-ups were calculated. Characteristics of the groups were found in agreement with pertinent scenarios of the theoretical framework. One group of bidders (n=16) supported Scenario 1 of the framework in which participating bidders had considered the reported project bid as having high strategic importance to their organizations and hence made aggressive, low bid mark-ups. Another group (n=4) supported Scenario 2 where bidders deemed the reported projects being non-strategically important and assessed their own companies? project backlogs being above aspirations; and therefore made risk averse, high bid mark-ups. Three different groups (n=22, n=5, and n=3) respectively supported different subsets of Scenario 3 of the framework. Scenario 3 refers to conditions where bidders perceive the observed projects as having low strategic importance and their own companies had performed below aspirations for at least one of the three performance-related determinants and hence made low bid mark-ups. The verified framework could be used by contractors to improve their own bidding strategy in anticipating the likely behavior of the competitors.
Appears in Collections:Ph.D Theses (Open)

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