A theoretical framework for determining the minimum number of bidders in construction bidding competitions

Abstract

A theoretical framework for determining the minimum number of bidders in competition for projects in the construction industry is proposed. This is based on the neo-classical microeconomic theory for price determination in construction and the assumption of random contractorselection. Empirical analysis of the Hong Kong data set not only illustrates the applicability of the framework, but also supports the relevance of the microeconomic model for construction price determination. The main implication for clients is that, in order to obtain the most competitive bids for projects in the most cost efficient way, they should vary the minimum number of bidders in competition according to market conditions.