The construction contract bidder homogeneity assumption: An empirical test

This paper describes an empirical study to test the proposition that all construction contract bidders are homogeneous, i.e. they can be treated as behaving collectively in an identical (statistical) manner. An examination of previous analyses of bidding data reveals a flaw in the method of standardizing bids across different size contracts and a new procedure is proposed which involves the estimation of a contract datum. Three independent sets of bidding data were then subjected to this procedure and estimates of the necessary distributional parameters obtained. These were then tested against the bidder homogeneity assumption, resulting in the conclusion that the assumption may be appropriate for a three-parameter lognormal shape, but not for scale and location.