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Ownerrsquo;s Countermeasures to Skewed Bidding in Construction Projects: Review of Current Practices and Proposal for New Countermeasures
Abstract
Skewed bidding is advocated as a contractor bidding strategy to obtain higher profit at the expense of the owner or gain competitive advantage over other bidders. Many scholars presented bid-skewing models to maximize a contractorrsquo;s benefits from unbalanced bids. Excessive skewing of bids has negative impacts on the owners and the integrity of the competitive bidding process. This paper presents a multitude of counterstrategies that can be utilized by owners and bidding officials in order to mitigate adverse impacts of skewed pricing on the owner. Some of the presented measures are preventive measures and intend to deter contractors from manipulating the pricing of their bids, and the rest are remedial measures that can mitigate the impacts of imbalance in bidding on the owner. The analyzed countermeasures are categorized according to the type of bid skewing sought by the strategy. Bidding officials can adopt one or combine a number of counterstrategies that suit their needs and go along with the jurisdictions governing their bidding process. It is expected that the diversity of the discussed countermeasures will provide indispensable support to bidding officials in their endeavors to protect public interests and ensure an efficient use of the public money. The presented counterstrategies should also prove to be useful to contractors because they prevent some contractors from taking unfair competitive advantage over other contractors who follow bidding instructions and bid balanced prices.
Author keywords: Skewed bidding; Unbalanced pricing; Competitive bidding; Construction owners; Bid pricing; Construction contracts; Bidding strategies.
Introduction
A balanced bid is a bid that involves proportionate assignment of project indirect and overhead costs for various project activities in addition to a uniform profit margin across all project cost items, and therefore the price of each line item reflects the estimated cost of the item plus a proportionate share of the intended profit. On the other hand, a skewed bid is a bid that involves disproportional distribution of indirect costs and profit across all line items and can rise up to the level of pricing some line items below direct costs while simultaneously compensating for this by excessively inflating the price of other line items. The practice of skewed bids is controversial (Hyari 2015; Lee et al. 2012; Gransberg and Riemer 2009). A considerable amount of research in the literature advocates skewed bidding and views it as a legitimate bidding strategy. Tens of models were developed to help contractors in manipulating bid prices to attain benefits in the bidding and/or construction phase (Su and Lucko 2014; Afshar and Amiri 2010; Liu et al. 2009; Cattell et al. 2004, 2008; Christodoulou 2008; Hoogenboom et al. 2006; Nassar 2004; Burnett and Wampler 1998; Yizhe and Youjie 1992; Diekmann et al. 1982; Ashley and Teicholz 1977; Stark 1974). The benefits sought from manipulating bid prices come mainly at the expense of the owner who fails to recognize this manipulation at the bidding stage (Su and Lucko 2014; Skitmore and Cattell 2013; Kelman 2008; Cattell et al. 2007). On the other hand, bidding regulations and a number of scholars have a different opinion on unbalanced bidding and have standpoints that ranges from discouraging such practice to absolutely opposing and condemning this technique as an unethical practice (Minchin et al. 2013; NCDOT 2012; Chotibhongs 2011).
Several scholars highlighted the negative impact of skewed bidding on the owner (Hyari 2015;
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