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Unsuccessful bids: Coefficient of variation of bids as indicator of project risk

Author

Listed:
  • Kim Young Joo

    (Department of Civil and Environmental Engineering, University of Maryland, College Park, MD 20742, USA.)

  • Skibniewski Miroslaw J.

    (Center of Excellence in Project Management, Department of Civil and Environmental Engineering, University of Maryland, College Park, MD 20742, USA. URL: http://e-construction.umd.edu)

Abstract

Although unsuccessful bids are usually discarded once the bids are opened under the typical lowest-price sealed-bid project award auction environment, considering efforts and resources expended by responsive and responsible bidders, it is likely that not only a successful bid but also unsuccessful bids can convey important information about the project at hand. This article documents an effort to answer the question that whether projects that receive more dispersed estimates at the bidding stage are more likely to experience greater project cost changes. Taking collective intelligence as the theoretical framework, a total of 210 projects conducted by the Ohio Department of Transportation between 2008 and 2018 were analyzed to investigate the relationship between the coefficients of variation of bids and project final costs. It was found that large projects with above-average coefficients of variation of bids showed greater deviations from original award amounts than large projects with below-average coefficients of variation. The finding enables project owners to study the projects before execution by recouping valuable insights from the community of bidders on the possibility of greater project cost changes faced by the planned projects without complex and mathematically rigorous models.

Suggested Citation

  • Kim Young Joo & Skibniewski Miroslaw J., 2020. "Unsuccessful bids: Coefficient of variation of bids as indicator of project risk," Organization, Technology and Management in Construction, Sciendo, vol. 12(1), pages 2193-2199, January.
    • Handle: RePEc:vrs:otamic:v:12:y:2020:i:1:p:2193-2199:n:9
    DOI: 10.2478/otmcj-2020-0015
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