Electronic-Based Procedure for Managing Unbalanced Bids

Abstract

Construction lump sum lowest bid procurement is one of the most prevalent methods of awarding construction contracts. For a lump sum bidding practice in Taiwan, after the lowest bidder is awarded a construction project contract, the contractual unit price for each cost item is taken as the product of the owner’s estimated unit price and a discounting ratio equal to the total bid price divided by the owner’s project cost estimate. This owner-based approach is inequitable because the bidder is denied the right to allocate the risks associated with the costs of performing the work. In U.S. practice, while the unit prices submitted by the bidder are usually considered as the contractual ones, unbalanced bids may occur. This work presents a bidder-based quantitative procedure, built on an electronic-based bidding process for effectively and efficiently supporting reviewing and adjusting the bidder’s proposed unit prices for a lump sum procurement project. The advantages of this procedure include that the unit prices electronically obtained from the owner and all qualified bidders are included in analyses during unit-price evaluation, and that rules for unit-price adjustment along with maintaining the total contractual price are included. The novel procedure has been successfully applied to several construction projects in Taiwan and the results have been greatly appreciated by both governments and contractors.