A Procedure for Rebalancing Unbalanced Bidding in Unit Price Contracts

Abstract

Unbalanced pricing in unit price contracts aims at gaining additional benefits for the contractor who utilizes this strategy at the expense of the owner, or obtaining a competitive advantage over other competing bidders who submit balanced or less skewed bids. This paper presents the development of a procedure to prevent the negative impacts of unbalanced prices in submitted bids on the owner. The proposed procedure rebalances the submitted rates of all bidders based on the reasonable price for each item as determined by the bidders themselves. The basis for adjusting item rates is the pack price of each item and the bidder’s total submitted bid price. Applying the procedure eliminates the need for the challenging task of detecting unbalanced bids, as well as the need to reject such bids and re-advertise the project. The proposed method can handle various forms of bid unbalancing, including front loading, quantity error exploitation, as well as the imbalance associated with collusion schemes. The procedure’s robustness is demonstrated through two examples. The method is anticipated to provide the needed protection for owners against additional costs and financial risks associated with an imbalance in bids. Simultaneously, the method deters bidders from manipulating submitted bids and nurtures fair competition among bidders to win the contract.