Critical Factors Affecting the Bid Cost of Building Construction Projects

Abstract

A cost database is essential for contractors to estimate accurate bid costs, and most contractors use historical cost databases for this purpose. Factors that influence bid cost should be investigated so that they are accurate. From the existing literature, this study identifies 30 factors that affect bid costs, and a survey was sent to 80 prime and subcontractors to determine the critical factors. The intraclass correlation test was conducted to determine the consistency of the responses. Then the Relative Importance Index (RII) was determined to identify the critical factors inhibiting the bid cost. In addition, the Mann-Whitney test was performed to determine whether the critical factors were highly ranked. Using RII and Mann-Whitney tests, the study determined seven critical factors that affect the bid cost of building projects: failure to track labor productivity; failure to report site-specific project conditions; failure to report complexity of the project; lacking documentation of union restrictions, regulations, local building code, and safety requirements; failure to report change order impact on labor productivity; failure to incorporate change orders into a cost control program; and failure to report project description. These findings will assist contractors to accurately bid building projects. The major practical implication of this study’s findings is that prime contractors and subcontractors can use these critical factors to determine an accurate bid of building construction projects. The contractors must pay attention to these top seven factors while determining the bid cost of building projects. If the contractors track the labor productivity and determine the change orders’ impact on labor productivity from their previous completed projects before bidding the building projects, the bid cost may be more accurate. Similarly, if they can conduct detailed investigations of the project sites, their locations, and their complexity, the prime contractors can include accurate contingency costs to cover these unknowns. In addition, prime contractors should be aware of rules and policy related to state and local building codes and contract procurement laws, and safety requirements in order to determine contingencies cost associated with these items, so that the bid cost can be accurate.