Empirical Bid or No Bid Decision Process in International Construction Projects: Structural Equation Modeling Framework

Abstract

The bid or no bid decision in international construction projects requires complex multiattribute analysis. Thus far, there exists no comprehensive framework to support the decision process. The objective of this study is to construct such a framework to support international contractors. Following a comprehensive literature review, five criteria and 41 factors were identified that bear on the decision. Questionnaire surveys were used to collect experts’ opinions on the importance of these factors in the decision of Chinese international contractors (CICs). The 41 factors were classified into six groups using factor analysis, with relationships among them validated through structural equation modeling (SEM). By integrating the five criteria with the six factors, a systematic framework for a no bid decision was developed. The outcome reveals that the bidding decision is a multistage decision process conducted in the following sequence: country risk vulnerability → ability to perform → project risk vulnerability → profitability → probability of winning. In validating this framework, a case study was also examined. Thus, this paper contributes to the body of knowledge on bid or no bid decision-making by offering an empirical framework that effectively links factors to criteria, and which sets out a basis on which contractors may rationally base a bid or no bid decision in the international arena.