Improving the Lowest Bid of Highway Construction Projects with a Bi-Parametric Contracting Method Based on Contractor Performance

The Lowest Bid (LB) contracting method is commonly used for public construction projects, including highway construction. However, this method often results in cost overruns, delays, and disputes. Alternative methods, such as the Best Value (BV) and Total Combined Bid (A + B), have been proposed to address these issues. However, the BV method can be lengthy and subjective, depending on the opinions of the Procurement Evaluation Committee (PEC), while the A + B method only considers time value, ignoring other performance factors. To address these weaknesses, this paper proposes a new contracting method that considers both cost and performance bi-parameters in the total combined bid. The equivalent performance value is calculated based on the contractor’s price elasticity of performance, using historical project performance data. A case study of a highway construction project issued by the Construction and Planning Agency (CPA), Ministry of Interior, Taiwan, is presented to demonstrate the feasibility and advantages of the proposed method compared to the traditional LB method. It is demonstrated that the proposed A + Q selects the contractor with 9.5% better performance in the case study. The study concludes that the proposed method combines the merits of the BV method with the simplicity and objectivity of the traditional LB method.