Risk Pricing in Construction Tenders - How, Who, What

Main Article Content

Marcus Tower
David Baccarini

Abstract

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.

Article Details

Section

Articles (Peer reviewed)

Author Biography

Marcus Tower, Curtin University of Technology

Senior Lecturer

How to Cite

Risk Pricing in Construction Tenders - How, Who, What. (2012). Construction Economics and Building, 8(1), 49-60. https://doi.org/10.5130/AJCEB.v8i1.2997