Canadian construction participants have long recognized that accepting the lowest price bid does not guarantee maximum value. Achieving a value-based procurement approach is a challenge, particularly for the Canadian public sector clients who are limited in their ability to evaluate the competitive bids based solely on the low-bid award system. Bid and cost data from 218 projects from three major public sector construction clients in the Greater Toronto Area are evaluated. Compared to the other clients, the cost escalation is significantly higher for the client that does not have a standard prequalification policy. Increased contractor competition (high number of bids) and a large price gap between low bid and other bids are correlated to higher cost escalation for the non-prequalifying client. Also, the organizational culture of the non-prequalifying client is less results-oriented. The research demonstrates the importance of prequalifying for clients that award based solely on the low bid.

Canadian construction participants have long recognized that accepting the lowest price bid does not guarantee maximum value. Achieving a value-based procurement approach is a challenge, particularly for the Canadian public sector clients who are limited in their ability to evaluate the competitive bids based solely on the low-bid award system. Bid and cost data from 218 projects from three major public sector construction clients in the Greater Toronto Area are evaluated. Compared to the other clients, the cost escalation is significantly higher for the client that does not have a standard prequalification policy. Increased contractor competition (high number of bids) and a large price gap between low bid and other bids are correlated to higher cost escalation for the non-prequalifying client. Also, the organizational culture of the non-prequalifying client is less results-oriented. The research demonstrates the importance of prequalifying for clients that award based solely on the low bid.

abstract: Saudi Arabia has been facing issues with completing construction projects on time and on budget. It has been documented that 70% of public construction projects are delayed. Studies have identified the low-bid delivery method as an important factor in causing such delays. The procurement system (low-bid) ignores contractors’ performance, and that is reflected in projects’ performance. A case study was performed, at a University campus in northern Saudi Arabia, identifying the major causes of project delays and cost overruns. The University was experiencing delays from 50% to 150%. Also, the actual project costs for four projects were examined and found that all four projects’ costs were higher than the original bid. The delay and cost overruns factors were gathered from the University engineers. A literature research identified one construction management method, best value performance information procurement system (BV PIPS), has documented multiple times its ability to improve project performance. In a comparison using the result of a case study and the results of (BV PIPS), Saudi Arabia’s delivery system was identified as a potential cause of project performance issues. The current procurement system was analyzed and modified to adapt with the (BV PIPS). The proposed procurement system using BV PIPS, which can be implemented in Saudi Arabia, was created with owner side. A large survey was conducted of 761 classified contractors and 43 universities’ representatives who rated causes of delay factors and cost overruns. The delay factors were then compared to delay factors experienced on Saudi construction projects, identified by performing a literature research. The comparison identified 14 important causes of delays. Moreover, the survey showed that classified contractors and universities’ representatives unsatisfied with low-bid, and they agreed with BV PIPS which selecting vendors based on performance with price. The proposed model required a submitted level of experience (LE), risk assessment (RA), and value added (VA). Besides, project managers of vendors should be interviewed during the clarification phase. In addition, venders should submit the project’s scope, technical schedule, milestone schedule, and risk management plan. In the execution phase, vendors should submit a weekly risk report (WRR) and director’s report (DR). / Dissertation/Thesis / Doctoral Dissertation Construction 2016

The aim of this master thesis is primarily to develop a methodological framework for a contracting authority receiving an abnormally low bid. The theoretical part of the thesis outlines the basic terms and definitions, analyzes a public tender from the perspective of a contracting authority and defines an extremely low bid price. The practical part of the thesis applies the methodological framework for dealing with an extremely low bid price on the case study, where on the set of selected areas of mechanical items indicates possible views above the limit costs of individual items costing unit prices of construction work.