Handling Unbalanced Bidding in Construction Projects: Prevention Rather Than Detection

Abstract

Unbalanced bidding is a common practice associated with both unit price and lump sum contracts. This practice is not usually in the owner’s best interests and is used in different forms by contractors for various reasons. Bid evaluation practices try to identify unbalanced bids and may reject the lowest bid if it is perceived to be unbalanced. Previous research on this topic focused on either helping contractors unbalance their bids or detecting imbalance in bids in order to reject them. This paper proposes a model based on a prevention, rather than detection, approach to handling unbalanced bidding. The proposed model balances all the bids submitted for a project and thereby neutralizes the impact of manipulating bid prices to obtain undeserved payments from owners. This approach protects the interests of the owners while maintaining the essence of competitive bidding by awarding the project to the bidder who submitted the lowest bid in a fair competitive process. Two examples, representing the bidding results of two projects, are analyzed to demonstrate the capability of the model in handling various forms of unbalanced bidding. Use of the model by owners will help protect them from the negative consequences of unbalanced bidding. It is also expected that, as owners begin to use the developed model, contractors will be less motivated to practice unbalanced bidding since it will not be possible to attain the desired objective by manipulating bid prices.