The risks of unbalanced bidding

David William Cattell, Paul Anthony Bowen, Ammar P. Kaka

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)

Abstract

Unbalanced bidding models have largely ignored the risk aspect of item pricing. Many researchers have acknowledged that there are considerable risks associated with unbalancing a bid but little has been done to describe these risks, let alone model them. A new framework is proposed by which all of these risks can be assessed. It identifies that these risks comprise the risk of rejection, the risk of reaction, and the risk of being wrong. It is further proposed that the value-at-risk ('VaR') method of measuring risk is a convenientay by which to combine all of these risks into one composite assessment. This quantified assessment serves to describe the extent of risk generated by each level of each item's price. Previous related research has proposed an unbalanced bidding model that has likewise provided a measurement of the expected reward generated by each level of each item's price. By doing a summation of these, keeping in mind that the prices applied to all of a project's component items must add up to the overall bid price, the contractor is able to assess both the risks as well as the rewards of all possible item price combinations.

Original languageEnglish
Pages (from-to)333-344
Number of pages12
JournalConstruction Management and Economics
Volume28
Issue number4
DOIs
Publication statusPublished - Apr 2010

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Bidding
Contractors
Composite materials
Costs
Reward
Bid
Pricing
Value at risk

Cite this

Cattell, David William ; Bowen, Paul Anthony ; Kaka, Ammar P. / The risks of unbalanced bidding. In: Construction Management and Economics. 2010 ; Vol. 28, No. 4. pp. 333-344.
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Cattell, DW, Bowen, PA & Kaka, AP 2010, 'The risks of unbalanced bidding' Construction Management and Economics, vol. 28, no. 4, pp. 333-344. https://doi.org/10.1080/01446191003663264

The risks of unbalanced bidding. / Cattell, David William; Bowen, Paul Anthony; Kaka, Ammar P.

In: Construction Management and Economics, Vol. 28, No. 4, 04.2010, p. 333-344.

Research output: Contribution to journalArticleResearchpeer-review

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