Integration of simulation-based cost model and multi-criteria evaluation model for bid price decisions

Abstract

Several criteria affect bidding decisions. Current bidding models determine a markup based on a fixed project construction cost. This work presents a novel bid price determination procedure that is built by integrating a simulation-based cost model and a multi-criteria evaluation model. The cost model is used to consider cost uncertainties and generate a bid price cumulative distribution, whereas the multi-criteria evaluation model applies pairwise comparisons and fuzzy integrals to reflect bidder preferences regarding decision criteria. The relationship between the two models is based on a practical phenomenon in that a bidder has a high probability of winning when criteria evaluations favor his bid, and, consequently, the bidder would bid a low price, and vice versa. The merits of the proposed procedure are demonstrated by its application to two construction projects in Taiwan.