Decision support and risk management system for competitive bidding in refurbishment work

Abstract

This study is concerned with the management of risks in competitive bidding for refurbishment work (lump sum contracts). It investigates the main difficulties and risks faced by contractors when they are making decisions in competitive bidding as a result of the general lack of information both inside and outside a contractor's organisation. A decision support and risk management system model is developed which provides a systematic and objective approach to risk management in competitive bidding for refurbishment work. The model provides a framework whereby both quantitative (tender bid records) and qualitative (risk perception of contractors) information may be obtained to support the decisions of contractors during tendering. The research adopts a combination of both Archival and Opinion research methodologies to build up two main databases consisting of tender bid records and information on the risk perception of contractors during tendering. From the analysis, a decision support and risk management system is developed consisting of six modules namely: (i) Module 1 - Databases of tender bid records and Repertory grid data, (ii) Module 2 - General information of bidding characteristics, (iii) Module 3 - Contractor's analysis, (iv) Module 4 - Competitor's analysis, (v) Module 5 - Bidding models, and (vi) Module 6 - Risk management system. This study has demonstrated that past tender bid records of contractors may be organised in a systematic way to provide invaluable strategic information to enhance the understanding of contractors with respect to their competitive bidding environments, their own bidding performance and the bidding behaviour of their competitors, thereby enabling contractors to manage risks more effectively and efficiently.