Review of Unbalanced Bidding Models in Construction

Abstract

Unbalanced bidding describes an activity otherwise known as item price loading. It is a practice used to some extent by building contractors to determine the prices that they will allocate to the individual component items within a project. This practice takes advantage of the contractor’s opportunity to manipulate these prices without this affecting their overall bid price for a project. Three types of loading are described, namely those of “front-end loading,” “back-end loading,” and “quantity error exploitation” (otherwise known as “individual rate loading”). Several scientists have expressed an interest in this field, starting with Marvin Gates in 1959. All of these scientific endeavors have entailed the attempt by which to mathematically determine the optimum method of item pricing. These efforts are seen as potentially significant given that it has become recognized that this practice can contribute substantially to a contractor’s profit as well as their risk. It is therefore interesting to note that although some research has found that some forms of unbalanced bidding are being practiced, there is no published research known to the writers that describes any practical application of any of the mathematical models that have been advocated by the aforementioned scientific community. A critical assessment is made of all of the scientific contributions known to the writers that have been in this field. This critical assessment finds flaws with all of the existing scientific proposals. In particular it finds fault with the technique that is incorporated into many of them by which prices are bounded by arbitrary upper and lower limits that have no scientific basis. It also concludes that further research is required to test the practical efficacy of some of these academic models.

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