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A theoretical framework for determining the minimum number of bidders in construction bidding competitions

Author

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  • Stephen Ngai
  • Derek Drew
  • H. P. Lo
  • Martin Skitmore

Abstract

A theoretical framework is proposed for determining the minimum number of bidders in competition for projects in the construction industry. This is based on the neo-classical micro-economic theory for price determination in construction and the assumption of random contractor-selection. Empirical analysis of the Hong Kong data set not only illustrates the applicability of the framework, but also supports the relevance of the microeconomic model for construction price determination. The main implication for clients is that, in order to obtain the most competitive bids for projects in the most cost-efficient way, they should vary the minimum number of bidders in competition according to market conditions.

Suggested Citation

  • Stephen Ngai & Derek Drew & H. P. Lo & Martin Skitmore, 2002. "A theoretical framework for determining the minimum number of bidders in construction bidding competitions," Construction Management and Economics, Taylor & Francis Journals, vol. 20(6), pages 473-482.
    • Handle: RePEc:taf:conmgt:v:20:y:2002:i:6:p:473-482
    DOI: 10.1080/01446190210151041
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    References listed on IDEAS

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    1. Patricia M. Hillebrandt, 1974. "Economic Theory and the Construction Industry," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-01927-4, September.
    2. Perman, Roger & Scouller, John, 1999. "Business Economics," OUP Catalogue, Oxford University Press, number 9780198775249, Decembrie.
    3. Martin Skitmore, 2002. "Raftery curve construction for tender price forecasts," Construction Management and Economics, Taylor & Francis Journals, vol. 20(1), pages 83-89.
    4. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
    5. Remer, Donald S. & Buchanan, Harry R., 2000. "Estimating the cost for doing a cost estimate," International Journal of Production Economics, Elsevier, vol. 66(2), pages 101-104, June.
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    Cited by:

    1. Qiao, Yu & Labi, Samuel & Fricker, Jon D., 2021. "Does highway project bundling policy affect bidding competition? Insights from a mixed ordinal logistic model," Transportation Research Part A: Policy and Practice, Elsevier, vol. 145(C), pages 228-242.
    2. Kunhui Ye & Weiyan Jiang & Liyin Shen, 2008. "Project competition intensity (PCI) in the construction market: a case study in China," Construction Management and Economics, Taylor & Francis Journals, vol. 26(5), pages 463-470.
    3. Bidabadi Zahra Toroghi & Hosseinalipour Mujtaba & Hamidizadeh Mohammad Reza & Mohebifar Amirhossein, 2016. "Supply chain collaboration within the Iranian construction industry," Organization, Technology and Management in Construction, Sciendo, vol. 8(1), pages 1437-1445, December.

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