Development and implementation of multiple criteria approaches to optimization in construction bidding

Competitive bidding optimization methods are aimed at determining the best price for a particular object of interest. What constitutes "best," however, depends upon the criteria of importance for a given situation. One criterion may dictate that a low bid is best, while another may call for considerably higher bid amounts. It is for these reasons that the bidding problem should be considered from a multi-criteria decision making (MCDM) perspective. Traditionally, quantitative techniques for determining bid strategies have sought bid markups to maximize expected (i.e. , long run) profits. Methods that have been developed for this purpose have witnessed only limited application and implementation success. At the same time, there are various multi-criteria optimization methods which have been developed but applied in other problem areas. The two optimization fields--bidding and MCDM--remain to be integrated. The primary goal of this research has been, therefore, to accomplish this integration: multi-criteria methods are being extended into the bidding problem area; and bidding optimization is being extended to consider multiple criteria. A secondary goal is the development of a design for a decision support system (DSS) to facilitate the adoption of these results by industry. Research has been done within the construction bidding context and includes: the analysis of economic and construction management data for over 500 projects with respect to well-known bidding factors and criteria; the development and extensive testing of a multi-criteria bidding optimization approach based on the analytic hierarchy process; and the development of guidelines for design of software to implement the optimization approaches. A wide variety of hypothetical multiattribute value functions have been used to analyze how the multi-criteria approach performs in comparison to more traditional profit-based bidding methods.