SIM-UTILITY: Model for project ceiling price determination

Wei-Chih Wang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

28 Scopus citations

Abstract

Before considering bids submitted by competing contractors for a public procurement project, the owner should determine a project ceiling price or cost estimate to use as a reference point for evaluating the bids. A high ceiling price conflicts with the owner's interests in minimizing costs. Meanwhile, a low ceiling price can jeopardize the project if all bids exceed the ceiling price. This paper proposes a model for determining a reasonable project ceiling price. The model, called SIM-UTILITY, is based on a utility theory and facilitated by a cost simulation approach. The utility theory is applied to reflect the owner's preferences regarding the determination criteria, while the simulation approach is used to generate more objective project cost data to support execution of the utility theory. The advantages of SIM-UTILITY are proven by its successful application to three construction projects in Taiwan. A computerized SIM-UTILITY is expected to be broadly applicable to public construction projects in Taiwan.

Original languageEnglish
Pages (from-to)76-84
Number of pages9
JournalJournal of Construction Engineering and Management
Volume128
Issue number1
DOIs
StatePublished - Feb 2002

Keywords

  • Bids
  • Cost estimates
  • Pricing
  • Project management
  • Utility theory

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