This study investigates the behavior of contractors when submitting bids under different institutional arrangements. Construction projects under the private and public sectors in Hong Kong operate under two distinct contractual and bidding arrangements giving different degrees of risk and uncertainty to the contractors. First, private sector projects in Hong Kong invariably adopt conditions of contracts that shift more risk to the contractor. A typical example is private sector projects do not normally allow fluctuation adjustments, thereby shifting the risks of future increase in prices of construction resources to the contractor. Public sector construction projects include fluctuation clauses for projects of duration over 21 months (Later extended to all contracts via Circular DEVB(PS)107/3 dated 18 July 2008). Second, it is common practice for private sector clients to negotiate with the contractors after they have submitted their bids. Although in some cases, private sector clients may also simply accept the lowest tender, bidders would normally anticipate that they are likely to negotiate with them after the bids are opened. This practice, however, is not allowed in public sector projects. For reasons of public accountability, Government tendering procedures do not allow changes to the bid price after the tenders have been submitted and the time for return lapsed (except for specifically approved cases). This requirement basically bars any price negotiation as in the case of private projects. We conjecture that these two differences in institutional arrangements have significant impact on bidders’ behavior, which would be characterized by the distribution and pattern of the submitted bid prices. Based on records of bid prices for 105 contracts tendered during the period 1997 and 2007, we found that public sector bids are more skewed to the left (or have a longer tail towards the left) than private sector bids, ceteris paribus. This means that low bids for public sector projects are more scattered than those of private sector projects. This result is consistent with the hypothesis that bidders attempt to hide their true bid prices by submitting higher bids when the client is not bound to accept the lowest tender. The empirical results also suggest that the bid-spread, as defined by the percentage difference between the lowest and second lowest bid, is higher when post tender negotiation is prohibited. Bidders would tend to submit more aggressive bids for public sector projects, knowing that they would not have a second chance to adjust their bid prices at a later stage. This suggests a higher probability of winner’s curse for public sector projects. For private sector projects that do not include fluctuation clauses, the bid-spread is also affected by the expected risk of future increase in the prices of construction resources. When such risk is high, bidders will become more cautious when submitting their bids and thus resulting in a lower bid-spread. The bid distributions for public sector project have thicker tails on both ends compared to those of private sector projects due to its prequalification system and the practice of acceptance of the lowest bid. The empirical evidence in this study confirms this. In addition, market conditions, number of bidders, contract size and the proportion of prime cost and provisional sum as a percentage of the contract sum are also important determining factors of biding behavior. The results of this study show that institutional arrangements matters in determining bidding behavior. Previous studies that attempt to estimate the distribution of bid prices for construction projects have largely ignored the importance of institutional arrangements, which may therefore lead to biased results. The results of this study contribute to our understanding of bidder’s behavior when bidding for construction projects under different institutional arrangements. The understanding will be useful in handling bidding exercises for new construction projects and the advancement of studies on bidding strategy models. / published_or_final_version / Real Estate and Construction / Master / Master of Philosophy

Thesis (Ph. D.)--University of Hong Kong, 2008. / Also available in print.

Thesis (Ph.D)--Management, Georgia Institute of Technology, 2008. / Committee Chair: Wu, D.J.; Committee Member: Keskinocak, Pinar; Committee Member: Narasimhan, Sridhar; Committee Member: Toktay, Beril; Committee Member: Zhang, Han.

Thesis (Ph.D. in electrical engineering)--Washington State University, May 2006. / Includes bibliographical references (p. 115-116).

published_or_final_version / Surveying / Master / Master of Science

published_or_final_version / abstract / Civil Engineering / Doctoral / Doctor of Philosophy

The aim of this dissertation is to develop a suitable bidding strategy for an internet bidding agent that allows the agent to obtain the lowest possible price for a desired product at an internet auction. The bidding strategy is obtained under the constraint of limited information available about the strategies of the opponents. The agent will operate in an internet auction environment. Therefore classic auction theory is researched and explained. Auctions are widely used to bring buyers and sellers of products together and to create a market to buy and sell goods. The buyer wants to pay the lowest possible price and the seller wants to receive the highest possible price. However, the seller has no influence on the final selling price of the product. Instead the price is determined by the buyers. The agent will place bids on the auction site on behalf of the human instructor. The bidding agent will make use of the theory behind auctions to influence the other bidders on the auction to make the lowest possible bids. The model suggested in this dissertation, the regressive bidding agent model (RBA model), will incorporate auction theory to create a suitable agent. The agent will predict the future bids of opponents on the auction, basing its predictions on a regressive function. The agent will base its own bids placed at the auction on the bidding time remaining at the auction together with the bids placed by other bidders on the auction. / Prof. E.M. Ehlers

Thesis (M. Sc.)--University of Hong Kong, 1999. / Includes bibliographical references (leaves 151-161).

Thesis (Ph.D.)--University of Delaware, 2008. / Principal faculty advisor: James G. Mulligan, Dept. of Economics. Includes bibliographical references.

Univ., Diss.--Göttingen, 2002.