A quantifiable method of assessing the risk of selecting the lowest bidder in construction projects:A literature review

Abstract

Contractor selection is an important step in ensuring the success of any construction project. Failing to adequately select the winning contractor may lead to problems in the project delivery phase such as bad quality and delay in the expected project duration; which ultimately results in cost overruns. This paper reviewed the strength of existing studies on the link between contractor selection strategy and project outcomes, with a view of proposing an approach on how one might try to examine this relationship moving forward. There are research that try to establish a direct relationship between contractor selection strategy and the outcome of the construction project. There are also decision support tools such as AHP or ANP that help clients prioritise various factors when selecting contractors. However the majority of these research and tools are informed by self-perception questionnaires and surveys that makes it difficult to gauge the strength of the relationship between contractor selection and project outcomes. In other words, there are hardly any empirical research that tries to establish this relationship. Literature review on the sources of cost overruns did not entirely reveal contractor selection as a main source of cost overrun; although from the explanations given for causes of cost overruns, one would be able to see how wrong contractor selection does play a part. Literature review on the various approaches to contractor selection on the other hand, did little to show the effect of contractor selection on the outcome of construction projects. Hence, the future direction of the research is to help clients see choosing a particular contractor selection strategy; whether lowest bid, or best value, affects the outcome of a construction project: cost and duration.