Title: Construction of a tender pricing model based on the combinational approach of the two-stage tenders

Authors: Reza Bandarian

Addresses: Commercialization and Business Development Department, Research Institute of Petroleum Industry, P.O. Box: 14665-137, West Blvd., Azadi Sports Complex, Tehran, Iran

Abstract: Estimating and bidding are two of the most important functions performed by bidders. This study aims at developing a competitive tender pricing model to determine the pricing mechanism of engineering project services coupled with the goal of assisting bidders for successful and efficient attendance in tenders. This study used a combinational approach to the pricing of two-stage tenders based on which a winning distribution function is developed in accordance with client preferences. The winning distribution function was considered to determine the winning probability of each offered price based on the normalised one. After developing the model, in order to consider the cost and the margin, the cost of the project is inserted in the model with the introduction of a new variable. Using this model, bidders can estimate the winning distribution function from the client's point of view. Also, they can determine the desirable winning probability and the corresponding price of that probability will be determined accordingly. The model has been validated with the actual project information (historical data) collected from a survey of engineering services.

Keywords: auctions; bidding prices; tender pricing models; two-stage tenders; applied probability; uncertainty modelling; decision support systems; DSS; engineering services; project services; client preferences; distribution function.

DOI: 10.1504/IJDSRM.2012.053362

International Journal of Decision Sciences, Risk and Management, 2012 Vol.4 No.3/4, pp.254 - 275

Received: 25 Jul 2011
Accepted: 04 Feb 2012

Published online: 19 Apr 2013 *

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