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Background
Tendering practices have been employed within the
construction industry for hundreds of years [1]. By the end
of the 18th century the architect's role became moulded
into more or less its present form at which time he was
seen as both the designer of buildings and the 'leader'
of the project coalition. The communication between
architect and builder about this time played a leading role
0961-3218 1993 E. & F. N. Spon
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PI score
This is the prequalification element. It is the first step in
the process and investigates the more general areas
surrounding potential tenderers. Some may suggest
that PI analysis need not be performed because such
assessment has been done previously by clients, prior
to contractors being accepted on to a tender list. As
highlighted, present prequalification procedure is performed by different client organizations with many subjective measures. PI score is not subjective but a
quantitative measure of the up-to-date performance potential of a constructor. Theoretically any number of
constructors can be assessed and duly awarded a PI
score.
Financial
Management resource
Past experience
Past performance
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Variables
Size
Age
Quality control
Health and safety
Litigation tendency
Maximum workload capacity
Ratio analysis accounts
Credit references
Turnover history
Qualification: owners/key personnel
Key persons' years with firm
Formal training regime
Type of projects completed
Size of projects completed
National or local
Failure to have completed a contract
Contracts overrun: time and cost
Actual quality achieved
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Other Specific
Variables
Experience within project geographic area
Experience of similar construction to project
Plant resource available for project
Key persons available for project
Qualification of these key persons
Current workload
Prior relationship with client/owner
Home office location to project
Form of contract
The variables constituting PI factors are to be industry wide and far more reaching than the 'in-house'
assessments presently performed by the majority of
clients. Information required for PI score analysis should
be relatively accessible in order to make the process
viable and effective.
The range of variables available for inclusion under PI
and P2 analysis is theoretically limitless. Research to date
points towards the factors in Table 1 as having most
potential for inclusion in PI analysis. Initially those
confirmed from the survey outlined earlier will be integrated into the model; however, there is scope for further
variation as the programme progresses to accommodate
specific procurement forms, project types, geographic
location etc.
Other considerations such as clients' knowledge,
experience and previous professional relationships
are to be encouraged. PI aims to complement such
traditional wisdom in the selection process, not
supersede it entirely.
PI =
where
Z score = F, W, + F2WZ + -FnWB
where
P2 score
Whilst those invited to tender from the results of Pi
analysis are compiling their bids, P2 scores can be
simultaneously calculated by the construction owner.
P2 further assesses the contractor in the light of more
specific factors, see Table 2. It may seem reasonable that
P2 factors should be considered at the pre-tender stage,
since the more factors considered the greater reliability
can be placed on the outcome. PI analysis concentrates
in the main on organizational aspects of the constructor;
therefore if the firm is failing on such important (PI)
factors as financial stability or a lack of resources, then
excellent P2 prospects are irrelevant. The PI process
aims to highlight those organizations who are stable
and fertile enough to be considered for subsequent P2
analysis.
P3 score
Previous research [19] has shown that both construction
owners and contractors rate cost as the most important
factor in the awarding and winning of contracts, it would
seem reasonable therefore to afford greater weight to
tender bid than P2 score. This is proposed as 60% tender
sum, 40% P2 score, as proportions in work done elsewhere associated with tender analysis [20], However, it is
clear that individual clients would necessarily wish to
determine this balance for themselves. A full explanation
of P3 calculation is shown in the example below.
x
x
x
x
W^O.90) = 0.675
VK2(0.80) = 0.480
W3(0.70) = 0.210
W4(0.90) = 0.720
2.085 = Zl score
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The P2 element
The P2 constituent
P2 =
and where
Tenderer
FnWnUn
14^(0.98) x
W2(0.92) x
W3(0.78) x
W4(0.86) x
W5(0.60) x
U^l.00) = 0.6860
t72(0.90) = 0.5382
C/3(0.88) = 0.6177
/4(0.75) = 0.4773
L75(0.95) = 0.5016
2.8208 = ZZ score
Z2 Max = 5, so:
2.8208
= P2 = 0.56 which could be expressed as 56%
5.0000 probability
The P3 element
The cost constituent
Assume that six tenders are to be considered. They are
ranked below in order of probability of being acceptable
to the owner, based on the one criterion of cost:
Bid
1
2
3
4
5
6
Rank
Value ()
1
2
3
4
5
6
100000
105000
107500
108000
110000
120000
P2
P3
Component
Score
Rank
4
1.00x0.6 + 0.56x0.4 = 0.824
1
0.95 x 0.6 + 0.78x0.4 = 0.882
3
0.93x0.6 + 0.76 x 0.4 = 0.862
0.92x0.6 + 0.49x0.4 = 0.748 6
2
0.91 x0.6 + 0.80x0.4 = 0.866
5
0.83 x 0.6 + 0.64x0.4 = 0.754
Thus it can be deduced from the above results that the
lowest bid is now ranked 4th with a P3 score of 82.4%.
The most viable tender under this proposal then would be
the second lowest bid with a P3 score of 88.2%.
Most forms of evaluation can be made more discriminatory by the introduction of musts, or cut-off points [17, 22];
the proposed technique is no exception to this. Say in the
above evaluation it is deemed that for a firm to be
considered the tenderer must have a bid less than
118000 and a P2score greater than 50%. We would then
have to exclude bid 6, (120K>118K) and bid 4 (P2:
49% < 50%). This may lead to exclusion of a low if not the
lowest bid but, with a P2 score below an acceptable
standard, this means that the contractor has a failing in
some criterion other than cost - therefore the P2 assessment has served its purpose.
1
2
3
4
5
6
Conclusion
The research to date has borne a fundamental decision
aid model to assist the construction owner in choosing a
constructor. The model is currently being stabilized and
validated. A comprehensive survey is presently under
way to verify the variables and their weighting indices.
Liaison with owners to date suggests that such a selection
process developed into an expert system would be accepted with open arms by the industry. As one major
owner put it, 'for too long the process has been a lottery
relying on subjective judgment and past experience'.
Acknowledgements
Cost
component
Formula
Probability
of acceptance
100000/100000
100000/105000
100000/107500
100000/108000
100000/110000
100000/120000
0.95
0.93
0.92
0.91
0.83
References
1. Burrows, M. (1981) Tendering in the Building Industry
1750-1850, Unpublished MPhil Thesis, Nottingham University, Nottingham.
2. Franks, J. (1990) Building Procurement Systems (2nd edn).
Chartered Institute of Building, Ascot.
3. Skitmore, R. M. (1989) Contract Binding in Construction.
Longman, Harlow.
4. Simon Committee (1944) The Placing and Management of
Building Contracts. HMSO, London.
5. Banwell, H. (1964) The Planning and Management of Contracts for Building and Civil Engineering Works. HMSO,
London.
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