Fuzzy Logic Model for Determining Minimum Bid Markup

A number of construction markets exhibit severe price competition where contractors must cut their bids to compete, giving priority to winning enough contracts to sustain normal operation, and it is common to see a winning bid close to the expected project cost. While cutting bids not only gives up profits but also undoubtedly increases the risk of making a loss, the behavior of contractors in intense competition is difficult to explain by existing models. In this paper, a fuzzy-logic-based model is proposed for determining the minimum bid markup with assessments of chance of winning and loss risk. The model incorporates the position of a decisionmaker in the fuzzy rules according to their attitude toward risk and degree of need for the job. Two illustrative examples, 1 hypothetical and 1 real, are provided, in which differences in priorities are simulated by 4 sets of fuzzy rules for comparison of the effects. Results show that the model is sensitive enough to differentiate a decisionmaker's position on bidding and suggest bid-cutting limits consistently, thereby remedying shortcomings of existing models.

Language

  • English

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  • Accession Number: 01054125
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jul 22 2007 12:09AM