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

摘要

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.