Risk Pricing in Construction Tenders - How, Who, What

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Marcus Tower
David Baccarini


Construction projects are most commonlyprocured in Australia by means of a traditionaldesign–tender–build model, whereby design islargely completed then contractors submittenders in a competitive environment.Construction contractors must consider riskswithin their tenders. This paper reports theresearch findings into pricing for risk incompetitive tenders by constructioncontractors. The research is based onstructured interviews with 10 contractingpersonnel; supplemented by 23 responses ofconstruction personnel from an online survey.Two common methods to price for risk are atrade-by-trade basis or an overall percentageor lump sum addition to the base estimate.Experience and intuition plays a significant rolein pricing for risk in tenders and the numberand type of people involved varies with projectsize, with greater involvement as project sizeincreases. The most significant risks priced intenders were: availability of resources; designor documentation errors; incomplete design;buildability issues; and inclement weather. Themost significant project factors considered bycontractors when pricing for risk in tenders are:value of liquidated damages; type ofcontract/procurement; completeness ofdocumentation; project complexity; and currentworkload. These risks and project factors areprimarily those over which the contractor haslimited or no control.

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How to Cite
Tower, M., & Baccarini, D. (2012). Risk Pricing in Construction Tenders - How, Who, What. Construction Economics and Building, 8(1), 49-60. https://doi.org/10.5130/AJCEB.v8i1.2997
Articles (Peer reviewed)
Author Biography

Marcus Tower, Curtin University of Technology

Senior Lecturer