The effect of contract type and size on competitiveness in construction contract bidding

Flanagan and Norman (1982b) examined the bidding performances of three contractors. In developing this study, the aim of this research is to demonstrate through statistical modelling that, in terms of competitiveness, competing contractors are influenced, to varying degrees, by contract type and size and that a competitiveness relationship exists between contractor size and contract size. Bidding behaviour between construction firms is regarded as the outcome of strategic management decisions undertaken in an economic setting. Contractors are seen to compete for construction work in a competitive environment made up of a series of market sectors, each containing an amalgam of contract types and sizes, while clients are viewed as initiators of the whole contracting process. Contractors are shown to respond to client demands by deciding on a strategic domain within which to operate, which contracts to bid for and, if opting to bid, the appropriate bid level. Two approaches to modelling competitiveness are offered. The first approach examines the relationship between competitiveness and variability in bidding and a four-way classification system of bidder behaviour is developed. The main goal of this work, however, is contained in the second approach, which uses multiple regression to construct a competitiveness model - a prediction equation relating bidder competitiveness (the dependent variable) to the independent variables of bidder (analysed individually and also grouped according to size), contract type and contract size. The regression model shows that differences in competitiveness are greater for different contract sizes than different contract types. The most competitive contractors appear to be those with a preferred contract size range. The results are inconclusive in providing evidence that large bidders are more competitive on larger contracts and vice versa.