Best-Value Contract Award Mechanism: A multi-criteria decision making model for construction projects

Abstract

In construction industry, projects require large amount of money and human effort. But due to project complexity, many projects get delayed and cost overrun puts the progress of project at stake. Traditional low-bid system of contract award has been criticized for its weaknesses in terms of evaluating the bidders’ expertise. The main issue is in decision making which is carried out for awarding the contract. It is at the core of project failure in terms of cost and time overruns. The lack of importance to other crucial factors such as safety record, sustainability sensitivity, managerial competence, resource utilizations, etc. has given birth to the idea of Best Value (BV) procurement strategy which takes a holistic view of a bid and analyzes its value proposition in both tangible and intangible terms before awarding the contract. This research attempts to facilitate the client by describing the priority indicators that could help in decision making. The indictors are recognized as key variables that impact the subsequent decisions of contract award. It presents a hierarchical review of relevant literature and integrates the factors that help in decision making using BV approach. This framework comprises of eight dimensions of BV contributing factors – cost, risk, performance, quality control, health and safety, project control, current workload and delay claims. However decision making in BV cases is quite challenging due to its multi-objective nature. Multi-criteria decision making (MCDM) techniques facilitate in such scenarios. This study uses Analytical Network Process (ANP) for contractor selection. Based on extensive literature review, BV contributing factors are identified and scrutinized by experts. Data is collected from real case studies of highway projects to validate the awarding decisions in the light of BV procurement strategy. The findings indicate that in almost all the cases, the traditional procurement system owing to stringent prequalification measures subliminally took into consideration overall value proposition and only one case study showed anomalies. Conclusions are drawn and practical implications are discussed.