A risk-oriented tender evaluation method for construction projects

Abstract

Evaluating tenders is an important process performed by clients to identify qualified contractors for carrying out construction projects. Since the clients rely heavily on the contractor to manage the projects, selecting the right contractor can greatly influence the delivery of the project. Evaluating tenders based on multiple criteria has been recognised as effective in identifying the most suitable tender and minimising the risks during the construction stage. In practice, a list of criteria covering the tender’s technical capability and financial performance is often used by client organisations. However, there is little research behind the selection of these criteria and the weighting being attributed to different criteria. Moreover, there remains a paucity of evidence on the quantification of these criteria. This study seeks to establish evaluation criteria and weightings for risk-oriented tender evaluation, based on an empirical investigation involving private construction clients in Malaysia. A list of significant risks is identified first through a literature review. The risks are then mapped with the tender evaluation criteria. The selection of risks and their mappings to evaluation criteria are validated through a questionnaire survey. The weighting for the final selected evaluation criteria is established through the analytic hierarchy process (AHP) group decision making (GDM) method. Finally, the study develops criteria for numerical scoring (CNS) through synthesising tender evaluation standard operating procedure (SOP) documents of private clients and literature sources. For each CNS, the numerical rating scale is defined on a 1- 5 scale to facilitate the uniformity of scores assigned when evaluating how well a tender meets the criteria. The outcome is a tender evaluation framework, including appropriate criteria, proper weights, and criteria for numerical scoring, which is programmed in MS Excel to help clients to evaluate tenders. The system will display the risk profile of each tender and provide a recommendation for selecting a successful tender. The developed framework was validated by practitioners and tested using two case studies. Information from previous tender reports was used, and the results generated by the system suggested a different tender for award consideration as compared to the previous method.