Statistical Methods in Bidding Decision Support for Construction Companies

On the border of two phases of a building life cycle (LC), the programming phase (conception and design) and the execution phase, a contractor is selected. A particularly appropriate method of selecting a contractor for the construction market is the tendering system. It is usually based on quality and price criteria. The latter may involve the price (namely, direct costs connected with works realization as well as mark-ups, mainly overhead costs and profit) or cost (based on the life cycle costing (LCC) method of cost efficiency). A contractor's decision to participate in a tender and to calculate a tender requires an investment of time and company resources. As this decision is often made in a limited time frame and based on the experience and subjective judgement of the contractor, a number of models have been proposed in the literature to support this process. The present paper proposes the use of statistical classification methods. The response obtained from the classification model is a recommendation to participate or not. A database consisting of historical data was used for the analyses. Two models were proposed: the LOG model-using logit regression and the LDA model-using linear discriminant analysis, which obtain better results. In the construction of the LDA model, the equation of the discriminant function was sought by indicating the statistically significant variables. For this purpose, the backward stepwise method was applied, where initially all input variables were introduced, namely, 15 identified bidding factors, and then in subsequent steps, the least statistically significant variables were removed. Finally, six variables (factors) were identified that significantly discriminate between groups: type of works, contractual conditions, project value, need for work, possible participation of subcontractors, and the degree of difficulty of the works. The model proposed in this paper using a discriminant analysis with six input variables achieved good performance. The results obtained prove that it can be used in practice. It should be emphasized, however, that mathematical models cannot replace the decision-maker's thought process, but they can increase the effectiveness of the bidding decision.

Automated summary

This paper investigates the tendering system for selecting contractors in the construction market and proposes the use of statistical classification methods to support this process. By analyzing historical data, two models were constructed using logit regression and linear discriminant analysis, with the latter achieving better results. Six key variables were identified in the model to assist contractors in making bidding decisions within a limited time frame.