Construction Work Bidding Strategies

Construction Work Bidding Strategies

By I Gusti Agung Adnyana Putera

Competition in the construction service industry is increasing in line with the number of companies engaged in the construction services (contractor). The capabilities of each contractor are certainly not equal and vary depend on the ownership of capital, human resources and tools. The objectives and profit targets of each contractor are vary as well. To get jobs that provide expected benefits, contractors apply many bid strategies, such as, analytical methods based on statistical calculations that consider the opportunity to win tenders and earn their targeted profits, pragmatic ways or only use instincts.

Many analytical methods are used to determine the bid price in order to win the tender, including the method developed by Gates, Friedman, Ackoff & Sasieni. These method use statistical data that considers the opportunity to get job and the percentage of profit that may be obtained against the bid price.

In practice, the contractors hope to win the tender and get their targeted profit. The contractors cannot submit a low bid price in order to win the tender, because they will tend to lose if they win the tender. Conversely, if the contractors submit a higher bid to achieve the targeted profit, then the chances of getting job will be lower. These two contradictions are faced at the same time by the contractors, that they must determine a bid price strategy in order to win the tender and obtain the maximum profit. Some tender bid strategies used by contractors are: a strategy of lowering prices, a loss-making strategy, and a competitive strategy. Moreover there are also contractors who use negotiation strategies either legally or illegally. Assuming that the tender is carried out through the Electronic Procurement System (EPS) and the system runs according to established standard procedures, then strategy that can be implemented are: reducing prices, loss-making or competitive strategy.

Competitive strategy is the most ideal strategy if tenders put forward the principle of fair business competition. The loss strategy is used by the contractors to gain sympathy from the owner and to hope of getting a job at the future. This strategy will be difficult to implement through EPS, especially to meet expectations for compensation for future work. The strategy that can be implemented is a strategy to reduce prices. This strategy can harm both the provider and the owner. Providers will lose if the price reduction is very high. From the owner's point of view, the quality of the project does not match the specifications, it can even fail the project.

In the presidential regulation number 16 of 2018 article 54 paragraph 2 it is stated that if there is a change in the contract, the contract value can increase as high as 10% from the initial contract value. The increasing contract value can be carried out if there is a change in the volume listed in the contract, changes in the type of activity, changes in technical specifications to suit field conditions, and changes in schedule.

Furthermore, in the regulation of the Government Goods / Services Procurement Policy Agency (GPPA) number 9 of 2018 it is stated that the evaluation of the fairness of the price is carried out if the offer value from the provider is less than 0.8 of owner estimate (OE). This can be interpreted that if the OE has been calculated correctly and in fact, there are contractors that submit bids below 80% of the OE, then this offer can be suspected to be unreasonable that it needs to evaluate the fairness of the price submitted by the contractors. Conversely, if the contractor offer value turns out to be reasonable, then the estimated OE can be suspected to be unreasonable. This provision can be used as a fair price evaluation tool for both providers and owners.