project managemnet
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Date
2013
Authors
Sameh Halaweh
Odai Abu Al-Rub
Mohannad Hanbali
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Abstract
To bid or not to bid for construction projects is an important strategic decision for contractors sustainability in the industry. So in order to make their decision easier and efficient, this study is going to identify, explore, and rank the relative importance of the critical factors determining contractors decisions to bid or not for construction projects in West Bank, Palestine. Moreover, this study aims to improve the competitiveness of bidding strategies. To achieve these objectives, this study discusses the construction situation in Palestine firstly. Secondly, it will list and group the factors affecting bid/no bid decision making depending on interviews with contractors, engineers, and academics, also depending on previous studies and investigations in other countries, then a structured questionnaire survey will distribute to a statistically representative sample of contractors of the highest classification categories in West Bank, after that data collection and analytical process will be started to rank the factors and determine the top ten critical factors. Finally, the study will elaborate these critical factors and also recommend some techniques for complex decision making to help contractors in the bidding phase, then suggest some strategies to improve competitiveness in the Palestinian market. Many Projects failed in Palestine due to underestimation and ignorance of current situation that surrounds those projects, its unique characteristics, and various factors which should be taken into considerations at the bidding phase such as: availability of required resources, size of the project, and expected total cost. Effective decision making at the bidding phase firstly should be taken in order to avoid these troubles, which can be done by exploring and taking the critical factors that affect a specific project into account. These factors differ from project to another due to its unique characteristics of a project, and from company to another, but there are general critical factors that affect the bidding decision whether to bid or not to bid of contracting companies in the Palestinian market. On the other hand there is randomness in making that decision which can lead to many problems that affect the sustainability of each construction company. Contractors in the Palestinian market face many problems in the bidding phase which cause low level of competition in construction industry which also may not provide the client satisfaction that he is seeking for. So in order to encourage the bidders to participate strongly in the construction tenders, with maximum level of benefits for both contractors and clients and minimum level of conflicts between these parties, also to make the process of decision making in bidding phase easier and efficient. Moreover, it will guide other contracting companies to identify and rank these factors, and also to make that decision easier by following one of the recommended decision techniques. This study aims to: Explore and rank factors affecting bid/no bid decision making in West Bank. Elaborate the critical factors which affect bidding decision in West Bank. Suggest some improvements of strategies in competitive bidding. Suggest some techniques for decision making. Clarify the situation of the construction industry in Palestine. Explain the concept of decision making briefly. It is clear that a healthy economy is a function of the demand for construction work which indicated by the number and value of construction projects. Companies must be able to deal with various bidding situations successfully in today's highly competitive construction market; competition never slows down in the construction industry. Besides that most of projects get awarded to contractors via tenders (competitive bidding) and depending mainly on the traditional delivery system (design, bid, and build) which is the principal point of this research. Firstly, companies need to consider whether bid or not to bid when they know about a bid. The contractor's decision for a certain project is associated with the risk allowance, the opportunity allowance, minimum acceptable rate of return (MARR) and the markup-size decision. Some contracting companies submit for bids, even though that this project does not exceed the MARR. This happens for many reasons, such as: that company needs to work, or it needs to cover its overhead costs, and also to have a good relationship with the client. Every company has its own bid/no-bid decision making approach, also there are a lot of models can be used by companies to make their decision easier, because the decision is made not only on the probability of winning the tender, but also on the need to consider the possibility that the company can finish the project successfully with some profits following the contract agreement. The prime requirement for each company is to balance between price and performance to get a considerable profit, and to gain a good reputation. Decision to bid has many effects on the contractor's company. For example, if he decides to bid for an inappropriate project, it would cause a considerable loss, a disputed relationship with the owner, and possible litigation or arbitration; at least, a substantial waste of valuable time and resources, which may be invested in a more profitable opportunity. On the other hand, if he did not decide to bid for appropriate project, it would cause losing an opportunity to make a sizable profit, enhance strength and position in the industry, and develop a relationship with an employer, which can further unfold several other opportunities for the contractor to endeavor. The researches about this topic made in many different countries over the years; these different countries have its own economic environments, policies, technologies, geography, and unique characteristics. The bidding decision considerations are different from one country to another, because the projects in developing countries are very different to developed countries. The projects in developing country have extra consideration on living standard; policies. Finally, it is difficult to make this crucial decision in a short time frame by the management team. So in order to make this decision easier and efficient and also to help contractors to become aware of the important factors which need to be considered when they intend to bid for different project, this research is going to identify, explore, and rank the relative importance of critical factors determining contractors decision to bid or not for construction projects in West Bank, Palestine. Also, suggest some techniques for this complex decision making, and then recommend some strategic improvements for competitiveness in bidding.