Optimal Bid Model for Price-Time Biparameter Construction Contracts

Abstract

Construction clients are increasingly calling for bids that require competing contractors to submit both the bid price and contract time. In such situations contractors are faced with the problem of deciding which combination of bid price and contract time to submit. An important consideration is the cost of time to the client. This varies from contract to contract and is usually expressed in terms of a unit time value such as liquidated damages rate or, for highway contracts, a daily road user cost. The unit time value is normally set out in the contract appendix and often used by the client as a basis for determining the contractor's total combined bid. This kind of procurement method is commonly referred to as the A + B method. To illustrate the mechanism of price-time biparameter procurement, a total combined bid Iso-map is developed in this study. The contractor's price-time performance curve is then incorporated into the map to determine the contractor's optimal bid parameters: tender price and contract time. Also, based on this mechanism, a mathematical optimization bid model is developed for calculating the optimal bid parameters.