Estimating Hypothetical Competitive Bid Price on Bid-rigged Projects Based on the Weights of Major Work Groups

Abstract

Bid-rigging has long been a problem in the construction area. This research identified the existing problems in evaluating damages from bid-rigging in Design-Bid-Build (DBB) and lowest-bid construction projects. Traditional econometric assessment based on stochastics requires sufficient historical data to obtain reliable estimates. Thus, it is crucial to collect and analyze data from pertinent projects for its utilization. To ensure the accuracy of the estimation, a substantial amount of data on the outcomes of DBB bids should have been gathered. In many construction projects, that requirement could not be met. Furthermore, econometric analysis cannot reflect the differences caused by the details of individual projects. This study proposes an alternative approach based on detailed cost estimates, weights of major work groups and their historical bid rates when historical data from similar projects are scarce. This approach can reflect the distinct characteristics of individual projects. The proposed model was applied to 23 gas pipeline construction projects under DBB and the lowest bid. This study identified the impacts of the different compositions of major work groups. Bid rates of the main work groups could not only be used to evaluate the damages caused by bid-rigging, but could also be used to determine reliable bid prices and provide a bidding strategy to aid the bidder's decision-making process in future bids for similar projects.