A Two-step Bidding Price Decision Algorithm under Limited Man-Hours in EPC Projects

Nobuaki Ishii, Yuichi Takano, Masaaki Muraki

Abstract

In Engineering-Procurement-Construction (EPC) projects, the contractor accepts an order through a competitive bidding process. If the contractor’s bidding price is set higher than that of a competitor due to cost estimation error, the contractor could fail to receive the order. Conversely, if the cost estimation error results in an underestimation of the cost, the contractor would be granted the order; however, he would eventually suffer a loss on this order. Thus, a bidding price decision in consideration of the cost estimation accuracy and the deficit order probability is essential for the contractor in EPC projects. In this paper, we develop a two-step bidding price decision algorithm. It allocates MH (Man-Hour) for cost estimation, which determines the cost estimation accuracy, to each order under the limited volume of MH, and then determines the bidding price for maximizing the expected profit under the deficit order probability constraint. Numerical examples show that the bidding price decision in consideration of the cost estimation accuracy and the deficit order probability is essential for the contractor to make a stable profit in EPC projects, and that the developed algorithm is effective for making such bidding price decision.

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Paper Citation


in Harvard Style

Ishii N., Takano Y. and Muraki M. (2013). A Two-step Bidding Price Decision Algorithm under Limited Man-Hours in EPC Projects . In Proceedings of the 3rd International Conference on Simulation and Modeling Methodologies, Technologies and Applications - Volume 1: SIMULTECH, ISBN 978-989-8565-69-3, pages 393-403. DOI: 10.5220/0004418903930403


in Bibtex Style

@conference{simultech13,
author={Nobuaki Ishii and Yuichi Takano and Masaaki Muraki},
title={A Two-step Bidding Price Decision Algorithm under Limited Man-Hours in EPC Projects},
booktitle={Proceedings of the 3rd International Conference on Simulation and Modeling Methodologies, Technologies and Applications - Volume 1: SIMULTECH,},
year={2013},
pages={393-403},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0004418903930403},
isbn={978-989-8565-69-3},
}


in EndNote Style

TY - CONF
JO - Proceedings of the 3rd International Conference on Simulation and Modeling Methodologies, Technologies and Applications - Volume 1: SIMULTECH,
TI - A Two-step Bidding Price Decision Algorithm under Limited Man-Hours in EPC Projects
SN - 978-989-8565-69-3
AU - Ishii N.
AU - Takano Y.
AU - Muraki M.
PY - 2013
SP - 393
EP - 403
DO - 10.5220/0004418903930403