Selection criteria and tender evaluation

Abstract

Several research studies have identified critical success factors and their impact on project success. Central to both success and failure is the issue of selection criteria, and the importance of incorporating qualitative factors when contracting for complex design and construction projects. Empirical findings suggest that price is still commonly used criterion for selecting a winner, even though tendering documents indicate that quality factors are part of the evaluation. In this paper we argue that tender competitions with high focus on price in complex design and construction projects deteriorate both incentives for collaboration and project outcome in terms of cost and quality. Thus, the lowest bid may paradoxically result in the most expensive project from both an investment and a life cycle cost perspective. We offer an alternative approach to evaluating tenders, based on the Equivalent Tender Price Model (ETPM). The aim is to increase the probability of avoiding project failure related to cost overrun, poor quality and lack of functionality, in addition to ensure more transparency in the tender evaluation process. Simulation tests of the model demonstrate that evaluation of tenders through an Equivalent Tender Price model makes selection criteria more transparent and quantifiable and therefore less at risk of manipulation.