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A bid-unbalancing method for lowering a contractor's financial risk

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  • Symeon Christodoulou

Abstract

A method is presented for unbalancing bids and optimizing the allocation of overall project profits to individual activities by considering the financial parameters of a project (bid mark-up and projected cash flow), in conjunction with lowering the exposure to possible financial disorder in the project. The method utilizes the general concept of entropy and a variant of it (hereby termed 'monetary entropy', H M) as measures of a project's perceived level of disorder, in order to distribute the total bid mark-up to the project activities. The entropy-based bid-unbalancing method seeks to minimize a possible financial disorder (the monetary entropy) resulting from limited monetary resources available to the project and from badly developed project cash flows. The intended primary users of the method are contractors during the initial bidding stage of a project.

Suggested Citation

  • Symeon Christodoulou, 2008. "A bid-unbalancing method for lowering a contractor's financial risk," Construction Management and Economics, Taylor & Francis Journals, vol. 26(12), pages 1291-1302.
    • Handle: RePEc:taf:conmgt:v:26:y:2008:i:12:p:1291-1302
    DOI: 10.1080/01446190802596238
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    Cited by:

    1. Yi Su & Gunnar Lucko, 2015. "Synthetic cash flow model with singularity functions for unbalanced bidding scenarios," Construction Management and Economics, Taylor & Francis Journals, vol. 33(1), pages 35-54, January.
    2. Polat Gul & Turkoglu Harun & Damci Atilla & Akin Firat Dogu, 2020. "Detecting unbalanced bids via an improved grading-based model," Organization, Technology and Management in Construction, Sciendo, vol. 12(1), pages 2072-2082, January.

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