Tenders and estimates: A probabilistic model

Problems faced by building project procurement agencies have been given only minor attention in the literature. When setting the rules of the tendering competition it is desirable that there be an appropriate balance between reasonable competition and a reasonable cost of competition. This paper examines some 410 projects obtained by a large state government instrumentality and proposes a model to describe the procurement system. It is probable that the lump sum competitive price in advance system of procurement is unsuitable for small renovation-type works. Larger projects having Bills of Quantities performed very well and satisfactory results can be obtained by inviting four tenders per project. Some suggestions are made for improving the quality of the professional estimate.