A bid decision-making model in the initial bidding phase for overseas construction projects: Fid-Bau Portal

A bid decision-making model in the initial bidding phase for overseas construction projects

Hwang, Jin-Sub / Kim, Yea-Sang

Abstract Recently, the award of overseas construction projects to Korean construction companies has substantially increased, and the number of Korean bids to win such projects has grown significantly also. Overseas project bidding characteristically requires a higher resource input cost in the initial preparation phase than does domestic project bidding. However, the bidding process of construction companies is frequently suspended for various reasons, and hence the opportunity cost associated with the bidding process becomes a sunk cost which, in turn, puts the bidder at a further loss. Therefore, by identifying projects with the highest chance of proceeding up to the final bid submission in the early phase of bidding, the sunk cost that results from a bid drop or suspension can be reduced and the projects with high bid probabilities can be targeted to enhance order possibility and performance capability. Unfortunately, many contractors tend to rely on qualitative assessments based on their past experiences and intuition, or on the Chief Executive Officers’ (CEO) subjective instructions, when making a bid decision. In this respect, this study proposes a model utilizing the logistic regression method, analyzing the correlation between various factors of project and bid decision making to increase the effectiveness of future decision making. If factors relating to the internal decision-making process of a construction company and overseas bidding process are coordinated, the bidders can be expected to enhance the reliability of their decisions using this model, and the cost incurred during a bidding process may be reduced.