The highs and lows of unbalanced bidding models

David Cattell

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

9 Downloads (Pure)

Abstract

The unbalanced bidding models developed in the first 50 years, since Marvin Gates first invented them in 1956, have suffered from a significant common flaw. Typically designed as linear programming models, with the objective being to maximise the contractor’s profitsfrom a project, they have incorporated constraints on the prices for each of the items such that they are each bound by lower and upper limits. The intent of this was to find optimum prices falling somewhere within these limits. Instead, the effect of these models has beenthat all optimal prices (barring only one) are found to lie exactly on the extreme edge of these limits. In effect then, these models serve only to decide which items should beassigned their lowest acceptable price, and which items should be assigned their highest acceptable price. Tests done on a series of simulated hypothetical projects, created randomly by way of an automated process, illustrate this effect, which has previously not being observed. This effect is suggested as being undesirable – these pricing boundaries are vague and heuristically difficult to determine and hence relatively ‘soft’ in nature, ratherthan being inelastic and hard-and-fast. The risks - that these limits are designed to avoid – are not of the nature that they are incurred (fully) marginally beyond these limits and yet not incurred at all within the limits. Nevertheless, even though these boundaries are only vaguely definable by nature, these models do somehow need to acknowledge that extreme prices are unacceptable and normal (‘central’) prices are fine. This problem has been solvedwith the use of component unit pricing (CUP) theory.
Original languageEnglish
Title of host publicationProceedings of the 19th CIB World Building Congress
EditorsStephen Krajewski, Karen Manley, Keith Hampson
Place of PublicationBrisbane
PublisherQueensland University of Technology
Pages96-102
Number of pages7
ISBN (Print)978-0-9875542-1-5
Publication statusPublished - May 2013
EventThe 19th Triennial CIB World Building Congress: Construction and Society - Queensland University of Technology, Brisbane, Australia
Duration: 5 May 20139 May 2013
Conference number: 19
http://www.conference.net.au/cibwbc13/index.php

Conference

ConferenceThe 19th Triennial CIB World Building Congress
CountryAustralia
CityBrisbane
Period5/05/139/05/13
Internet address

Fingerprint

Bidding
Nature
Pricing
Linear programming
Contractors
Unit pricing

Cite this

Cattell, D. (2013). The highs and lows of unbalanced bidding models. In S. Krajewski, K. Manley, & K. Hampson (Eds.), Proceedings of the 19th CIB World Building Congress (pp. 96-102). Brisbane: Queensland University of Technology.
Cattell, David. / The highs and lows of unbalanced bidding models. Proceedings of the 19th CIB World Building Congress. editor / Stephen Krajewski ; Karen Manley ; Keith Hampson. Brisbane : Queensland University of Technology, 2013. pp. 96-102
@inproceedings{a0aa964b03034b3a9eed830f7cc946f2,
title = "The highs and lows of unbalanced bidding models",
abstract = "The unbalanced bidding models developed in the first 50 years, since Marvin Gates first invented them in 1956, have suffered from a significant common flaw. Typically designed as linear programming models, with the objective being to maximise the contractor’s profitsfrom a project, they have incorporated constraints on the prices for each of the items such that they are each bound by lower and upper limits. The intent of this was to find optimum prices falling somewhere within these limits. Instead, the effect of these models has beenthat all optimal prices (barring only one) are found to lie exactly on the extreme edge of these limits. In effect then, these models serve only to decide which items should beassigned their lowest acceptable price, and which items should be assigned their highest acceptable price. Tests done on a series of simulated hypothetical projects, created randomly by way of an automated process, illustrate this effect, which has previously not being observed. This effect is suggested as being undesirable – these pricing boundaries are vague and heuristically difficult to determine and hence relatively ‘soft’ in nature, ratherthan being inelastic and hard-and-fast. The risks - that these limits are designed to avoid – are not of the nature that they are incurred (fully) marginally beyond these limits and yet not incurred at all within the limits. Nevertheless, even though these boundaries are only vaguely definable by nature, these models do somehow need to acknowledge that extreme prices are unacceptable and normal (‘central’) prices are fine. This problem has been solvedwith the use of component unit pricing (CUP) theory.",
author = "David Cattell",
year = "2013",
month = "5",
language = "English",
isbn = "978-0-9875542-1-5",
pages = "96--102",
editor = "Stephen Krajewski and Manley, {Karen } and Keith Hampson",
booktitle = "Proceedings of the 19th CIB World Building Congress",
publisher = "Queensland University of Technology",
address = "Australia",

}

Cattell, D 2013, The highs and lows of unbalanced bidding models. in S Krajewski, K Manley & K Hampson (eds), Proceedings of the 19th CIB World Building Congress. Queensland University of Technology, Brisbane, pp. 96-102, The 19th Triennial CIB World Building Congress, Brisbane, Australia, 5/05/13.

The highs and lows of unbalanced bidding models. / Cattell, David.

Proceedings of the 19th CIB World Building Congress. ed. / Stephen Krajewski; Karen Manley; Keith Hampson. Brisbane : Queensland University of Technology, 2013. p. 96-102.

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

TY - GEN

T1 - The highs and lows of unbalanced bidding models

AU - Cattell, David

PY - 2013/5

Y1 - 2013/5

N2 - The unbalanced bidding models developed in the first 50 years, since Marvin Gates first invented them in 1956, have suffered from a significant common flaw. Typically designed as linear programming models, with the objective being to maximise the contractor’s profitsfrom a project, they have incorporated constraints on the prices for each of the items such that they are each bound by lower and upper limits. The intent of this was to find optimum prices falling somewhere within these limits. Instead, the effect of these models has beenthat all optimal prices (barring only one) are found to lie exactly on the extreme edge of these limits. In effect then, these models serve only to decide which items should beassigned their lowest acceptable price, and which items should be assigned their highest acceptable price. Tests done on a series of simulated hypothetical projects, created randomly by way of an automated process, illustrate this effect, which has previously not being observed. This effect is suggested as being undesirable – these pricing boundaries are vague and heuristically difficult to determine and hence relatively ‘soft’ in nature, ratherthan being inelastic and hard-and-fast. The risks - that these limits are designed to avoid – are not of the nature that they are incurred (fully) marginally beyond these limits and yet not incurred at all within the limits. Nevertheless, even though these boundaries are only vaguely definable by nature, these models do somehow need to acknowledge that extreme prices are unacceptable and normal (‘central’) prices are fine. This problem has been solvedwith the use of component unit pricing (CUP) theory.

AB - The unbalanced bidding models developed in the first 50 years, since Marvin Gates first invented them in 1956, have suffered from a significant common flaw. Typically designed as linear programming models, with the objective being to maximise the contractor’s profitsfrom a project, they have incorporated constraints on the prices for each of the items such that they are each bound by lower and upper limits. The intent of this was to find optimum prices falling somewhere within these limits. Instead, the effect of these models has beenthat all optimal prices (barring only one) are found to lie exactly on the extreme edge of these limits. In effect then, these models serve only to decide which items should beassigned their lowest acceptable price, and which items should be assigned their highest acceptable price. Tests done on a series of simulated hypothetical projects, created randomly by way of an automated process, illustrate this effect, which has previously not being observed. This effect is suggested as being undesirable – these pricing boundaries are vague and heuristically difficult to determine and hence relatively ‘soft’ in nature, ratherthan being inelastic and hard-and-fast. The risks - that these limits are designed to avoid – are not of the nature that they are incurred (fully) marginally beyond these limits and yet not incurred at all within the limits. Nevertheless, even though these boundaries are only vaguely definable by nature, these models do somehow need to acknowledge that extreme prices are unacceptable and normal (‘central’) prices are fine. This problem has been solvedwith the use of component unit pricing (CUP) theory.

M3 - Conference contribution

SN - 978-0-9875542-1-5

SP - 96

EP - 102

BT - Proceedings of the 19th CIB World Building Congress

A2 - Krajewski, Stephen

A2 - Manley, Karen

A2 - Hampson, Keith

PB - Queensland University of Technology

CY - Brisbane

ER -

Cattell D. The highs and lows of unbalanced bidding models. In Krajewski S, Manley K, Hampson K, editors, Proceedings of the 19th CIB World Building Congress. Brisbane: Queensland University of Technology. 2013. p. 96-102