Operations Research, Systems Engineering and Industrial Engineering Commons^™

An Agent-Based Model To Study Competitive Construction Bidding And The Winner's Curse, Amr Elsayegh, Cihan H. Dagli, Islam H. El-Adaway

Engineering Management and Systems Engineering Faculty Research & Creative Works

Reverse auction theory is the basis for competitive construction bidding process. The lowest bid method is utilized for selecting contractors in public projects. The winning contractor having the lowest bid value could be cursed when the submitted bid value results in negative profits. This is caused by many factors such as the contractor's estimation accuracy and markup. This is addressed in this paper by providing a model simulating the construction competitive bidding and the occurrence of the winner's curse. To this end, the authors show the extent to which the winner's curse affects the status of contracting companies. The objectives …