Comparing Contractors' Decision to Bid in Different Market Environments

Bee-Lan Oo
Derek Drew
Hing-Po Lo


The competitive situations within the Australia,Hong Kong and Singapore constructionmarket environments are compared byobserving the contractors’ decision to bidbehaviour according to two extreme marketconditions (i.e. booming and recession) anddifferent number of bidders scenarios (rangingfrom 4 to 30). Data were collected via adesigned experiment so as to make directcomparisons possible. This study providesevidence that contractors’ decision to bidbehaviour varies in different marketenvironments. Inline with decreasingprobability of winning, the ‘bid’ responses ofthe three groups of contractors decrease asthe number of bidders increases. However, allAustralian respondents declined to bid whenthe number of bidders exceeded 10, even inrecession. This is in stark contrast to HongKong and Singapore where about 30% ofrespondents were willing to bid in competitionscontaining 30 bidders, even in boom periods.In addition, the ‘bid’ responses of Australiawere higher in booming than in recessiontimes when the number of bidders, N ≤ 4. TheHong Kong construction market environmentwas found to be the most competitive withconsiderably higher proportions of ‘bid’responses; this was followed by the Singaporeand Australia, respectively.

Full Text:



Ahmad, I. and Minkarah, I. (1988). Questionnaire survey on bidding in construction. Journal of Management in Engineering, 4(3), 229-243.

Akintoye, A. and Skitmore, M. (1992). Pricing approaches in the construction industry. Industrial Marketing Management, 21, 311-318.

Ang, Y. K. and Ofori, G. (2001). Chinese culture and successful implementation of partnering in Singapore's construction industry. Construction Management & Economics, 19(6), 619-632.

Australian Bureau of Statistics (2004). Private sector construction industry, Australia, 2002-03 (cat. no. 8772.0). Australian Bureau of Statistics, Canberra.

Australian Procurement and Construction Council (1999). National Code of Practice for the Construction Industry towards best practice guidelines. Australian Procurement and Construction Council, Canberra.

Bajaj, D., Oluwoye, J. and Lenard, D. (1997). An analysis of contractors' approaches to risk identification in New South Wales, Australia. Construction Management & Economics, 15(4), 363-369.

Building Construction Authority (2005). BCA contractors registry. Singapore Government, Singapore. Available online:

Carr, R. I. (1983). Impact of number of bidders on competition. Journal of Construction Engineering and Management, 109(1), 61-73.

Census and Statistics Department (2004). Principle statistics for all building and civil engineering establishments. Hong Kong SAR Government, Hong Kong. Available online:

Davis Langdon and Seah International (2000). Spon's Asia Pacific construction costs handbook, 3rd ed. E & F. N. Spon, London.

De Neufville, R. and King, D. (1991). Risk and need-for-work premiums in contractor bidding. Journal of Construction Engineering and Management, 117(4), 659-673.

De Neufville, R., Hani, E. N. and Lesage, Y. (1977). Bidding models: Effects of bidders' risk aversion. Journal of Construction Division, 103(1), 57-70.

Department of Employment and Workplace Relations (2006). Australian Government implementation guidelines for the National Code of Practice for the Construction Industry. Commonwealth of Australia.

Department of Industry, Science and Resources (1999). Building for growth: an analysis of the Australian Building and Construction Industries. Commonwealth of Australia.

Drew, D. and Skitmore, M. (2006). Testing Vickery's revenue equivalence theory in construction auctions. Journal of Construction Engineering & Management, 132(4), 425-428.

Dulaimi, M. F., Ling, F. and Ofori, G. (2001). Building a world class construction industry: enablers and motivators. National University of Singapore, Singapore.

Dyer, D. (1987). An experimental analysis of auction theory, PhD thesis. University of Houston.

Dyer, D. and Kagel, J, H. (1996). Bidding in common value auctions: how the commercial construction industry corrects for the winner's curse. Management Science, 42(10), 1463-1475.

Dyer, D., Kagel, J. H. and Levin, D. (1989). A comparison of naive and experienced bidders in common value offer auctions: a laboratory analysis. Economic Journal, 99, 108-115.

Econ (2004). A report for the Office of Fair Trading: Assessing the impact of public sector procurement on competition, available at

Egemen, M. and Mohamed, A. N. (2007). A framework for contractors to reach strategically correct bid/no bid and mark-up size decisions. Building and Environment, 42(3), 1373-1385.

Environment, Transport and Works Bureau (2005). List of approved contractors for public works. Hong Kong SAR Government, Hong Kong. Available online:

Fayek, A. and Young, D. M. (1998). A survey of tendering practices in the Australian construction industry. Engineering Management Journal, 10(4), 29-34.

Fayek, A., Ghoshal, I. and AbouRizk, S. (1999). A survey of the bidding practices of Canadian civil engineering construction contractors. Canada Journal of Civil Engineering, 26, 13-25.

Flanagan, R. and Norman, G. (1985) Sealed bid auctions: an application to the building industry. Construction Management & Economics, 3(2), 145-161.

Friedman, L. (1956). A competitive bidding strategy. Operations Research, 4(1), 104-112.

Hackemer, G. C. (1970). Profit and competition: estimating and bidding. Building Technology and Management, Dec, 6-7.

Hillebrandt, P.M. (2002). Economic theory and the construction industry. Macmillan Press Ltd., London.

King, M. and Mercer, A. (1990). The optimum markup when bidding with uncertain costs. European Journal of Operational Research, 47, 348-363.

Lasserre, P. and Probert, J. (1998). Competing in Asia Pacific: understanding the rules of the game. Long Range Planning, 30(1), 30-50.

Male, S. Strategic management in construction: conceptual foundations. In Competitive Advantage in Construction (edited by S.P. Male and R. Stocks editors), p. 1-4. Butterworth-Heinemann, Oxford.

Meikle, J. L. (1990). International comparisons of construction costs and prices. Habitat International, 14(2/3), 185-192.

Ngai, S. C., Drew, D. S., Lo, H. P. and Skitmore, M. (2002). A theoretical framework for determining the minimum number of bidders in construction bidding competitions. Construction Management & Economics, 20(6), 473-482.

Odusote, O. O. and Fellows, R. F. (1992). An examination of the importance of resource considerations when contractors make project selection decisions. Construction Management & Economics, 10(2), 137-151.

Ofori, G. (1996). International contractors and structural changes in host country construction industries: case of Singapore. Engineering Construction & Architectural Management, 3(4), 271-288.

Ofori, G. and Chan, S. L. (2001) Factors influencing development of construction enterprises in Singapore. Construction Management & Economics, 19(2), 145-154.

Oo, B. L. and Drew, D. (2005). The bidding environments of Hong Kong and Singapore construction industries. In Proceedings of 2005 International Conference on Construction & Real Estate Management (edited by Y. Wang. and Q. Shen), p. 65-70. Penang, Malaysia.

Pries, F. and Janszen, F. (1995). Innovation in the construction industry: the dominant role of the environment. Construction Management & Economics, 13(1), 43-51.

Runeson, K. G. (1988). Methodology and method for price-level forecasting in the building industry. Construction Management & Economics, 6(1), 49-55.

Shash, A. A. (1993) Factors considered in tendering decisions by top UK contractors. Construction Management & Economics, 11(2), 111-118.

Skitmore, M. (1989). Contract Bidding in Construction, Longman, Harlow.

Skitmore, M. (2002) Raftery curve construction for tender price forecasts. Construction Management & Economics, 20(1), 83-89.

The Straits Times (2004). Budget terminal: 28 firms bid for job, Singapore.

Thorpe, T. and McCaffer, R. (1991) Competitive bidding and tendering policies. In Competitive Advantage in Construction (edited by S.P. Male and R. Stocks editors), p. 163-194. Butterworth-Heinemann, Oxford.

Underhill, E. (2003) The Australian construction industry: union control in a disorganized industry. In Building Chaos (edited by G. Bosch and P. Philips), p.114-137. Routledge, London.

Wilson, O. D., Atkin, A.S., Sharpe, K. and Kenley, R. (1987). Competitive tendering: the ideal number of tenders. In Managing Construction Worldwide (edited by P. R. Lansley and P. A. Marlow), p. 175-186. E. & F. N. Spon, London.