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Strategic Factors Influencing Bid/No-Bid Decision of Pakistani Contractors

Chapter · January 2018

DOI: 10.1007/978-981-10-6190-5_118

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Chapter 118
Strategic Factors Influencing Bid/No-Bid
Decision of Pakistani Contractors

Ahsen Maqsoom, Malik Muhammad Farjad,

Muhammad Sadaat Abbas, Muhammad Ehtesham-Ul-Haque,
Muhammad Irfan and Aman Ullah Malik

118.1 Introduction

Construction industry contributes towards both economy and social betterment of

the countries (Maqsoom and Charoenngam 2015). Bidding and procurement issues
are long associated with construction industry and its clients. Though few scholars
have tried to investigate these issues but improvements are still needed. Among the
many factors affecting accomplishment of construction projects, time and cost
overrun are major ones mainly caused by unmanaged bidding and bad procurement
procedures. To mitigate these issues, latest and innovative bidding and procurement
procedures need to be followed.
Construction industry is not only a significant factor for developed countries but
also for under developed countries whose major portion of economy depends upon
it. In Pakistan, there are several construction companies including national and

A. Maqsoom (&)
M.M. Farjad
M.S. Abbas
M. Ehtesham-Ul-Haque
M. Irfan

Department of Civil Engineering, COMSATS Institute of Information and Technology,
Wah Cantt, Pakistan
e-mail: ahsen.ait@gmail.com
M.M. Farjad
e-mail: student.civil.123@gmail.com
M.S. Abbas
e-mail: student.civil.123@gmail.com
M. Ehtesham-Ul-Haque
e-mail: student.civil.123@gmail.com
M. Irfan
e-mail: student.civil.123@gmail.com
A.U. Malik
Allama Iqbal Open University, Attock, Pakistan
e-mail: Amanmalik66@gmail.com

© Springer Nature Singapore Pte Ltd. 2018 1345

K.W. Chau et al. (eds.), Proceedings of the 21st International Symposium
on Advancement of Construction Management and Real Estate,
https://doi.org/10.1007/978-981-10-6190-5_118
1346 A. Maqsoom et al.

multinational governing the sector with high competition (Maqsoom and

Charoenngam 2014; Maqsoom et al. 2014). The criterion of bid award in Pakistan
is low bid or price based method where as in developed countries it is mostly the
Best value procurement method that ensures high performance and quality work.
The basic problem in low bid method is that it does not give value to quality and
performance resulting into poor quality construction and performance. There are
several short comings which need to be mitigated. Hence this research is aimed at
providing factors that affect bid/no-bid decision of Pakistani contractors. The aims
of this research are: (1) to identify the strategic factors considered by contractors in
making bid/no-bid decision; (2) to analyze the impact and occurrence of these
factors in bid/no-bid decision; and (3) to formulate a framework that will be helpful
for contractors to make an efficient decision based on results.

118.2 Literature Review

Making profit and winning tender is one of the main ways for construction firms to
survive in industry and achieving its aims. Making profit without entering bid and
winning project is not the usual application (Egemen and Mohamed 2007). To
survive in the highly competitive construction market, a firm needs to win bid. For
this, bid or not to bid is one of the critical steps the company should consider, when
an invitation has been received (Ma 2011). There are two ways for the construction
firm to obtain the job; either by negotiation with client or competitive bidding
(Dikmen et al. 2007).
Over the history, bid/no-bid decision remained the main problem for contractors
around the world. Many studies have been conducted by different researchers in
different countries on this topic. Problem remained the same but approaches were
different for finding solution. Ahmad and Minkarah (1987) carried out study for
USA and selected top 5 factors from 31 listed factors that impact bid/no-bid
decision. These factors are: need for work, historic benefit, job type, owner repu-
tation, and degree of hazards. Shash and Abdul-Hadi (1992) identified 37 factors
that affecting bid/no bid decision of Saudi Arabian contractors and ranked them as
per their importance. Odusote and Fellows (1992) identified 42 factors for con-
tractors in UK. Out of these 42 factors, they ranked top 5 which are: client’s ability
to pay, work type, profitability, client’s satisfaction, and regular client-good
relationship. Chua and Li (2000) concentrated on four main groups to identify
factors affecting bidding decision in Singapore that are: competition, risk, com-
pany’s position in bidding, and need for work. Unlike previous studies, they
assigned a resigning model on the basis of these factors to bid/no-bid decision.
Egemen and Mohammad (2007) identified and grouped 50 factors into 6 categories
and included 13 subcategories in total for contractors of Northern Cyprus and
Turkey which are: need for a work, strength of firm, project conditions contributing
to profitability, risks of project, competitions and strategic condition. Bageis and
Fortune (2009) carried forward the work of Ahmad and Minkarah (1987) and
118 Strategic Factors Influencing Bid/No-Bid Decision … 1347

identified 100 potential factors for Saudi Arabian contractors. A questionnaire

survey was used to identify and rank factors affecting bidding decision and ana-
lyzed them in terms of differences between returned responses with respect to
differing respondent’s characteristics. Ma (2011) conducted a research in Auckland,
New Zealand with a focus on factors affecting small to medium sized contractors in
Auckland. Data was collected by carrying out a face to face structured interview
format, incorporating a questionnaire with eight participants, experience and
familiarity of firm with its specific type of work, possible contribution in building
long-term relationships with other key parties and current financial capability of
client.

118.3 Research Methodology

A structured questionnaire was formulated on basis of objectives of this research

considering identified factors: construction market related factors, political related
factors, barriers and limitations related factors, site related factors and
sub-contractor related factors. All factors were further divided into sub-groups
having impact on bid/no-bid decision of contractors. Questionnaire was divided
into two parts: (1) open questions and (2) closed questions. In first section,
respondents were asked to answer general questions related to their experience and
their firms where as in second section; respondents were given 5 options based on
likert scale.
The research was carried out in two steps: (1) pilot survey and (2) final ques-
tionnaire. A questionnaire was formed and pilot tested in April 2016 on 11 con-
tractor firms. The minimum designation of respondents was Engineer ascending up
to Project Manager and General Manager of particular firm. After pilot survey,
improvements were made in questionnaire and final questionnaire was developed
on basis of suggestions and recommendation by respondents. In questionnaire,
factors were arranged and represented in a simplistic way for easy apprehension of
respondents for selection of right option. Some questions were confidential and it
was certain that firms will hesitate to answer these questions so they were given in
percentages rather than numbers or figures for making it easier to be understood by
the respondent. The final questionnaire was developed after a successful pilot
survey and was sent to a population of contractor firms all over Pakistan in May
2016. Questionnaire was distributed through two ways: it was either mailed to
contractor firms, or it was given in person to different firms. All contractor firms
considered for the research were registered members of PEC (Pakistan Engineering
Council). The Head of Administration of University and Pakistan Engineering
Council (PEC) endorsed the questionnaire by a cover letter, thus providing legiti-
mate authority to distribute questionnaire among registered contractor firms of PEC.
The questionnaire was sent to 300 registered contractor firms in total, from which
167 responded to it. Thus, the response rate was 55.66%. Statistical Package for the
Social Sciences software was used to analyze the data collected from these firms.
1348 A. Maqsoom et al.

118.4 Findings

The first phase of analysis is related to the construction market related factors of
Pakistani contractors. Most of these factors were taken from earlier researches on
factors affecting bid/no-bid decision while some were self-developed. The
respondents were asked to rate variables using Likert scale (where 1 = not
important; 5 = very important). The results are shown in Fig. 118.1. ‘Number of
projects available in market with same size’ is top ranked factor with Mean
Importance Ranking (MIR) value of 3.64 for impact and 3.07 for occurrence under
construction market related factors.
If there are a number of projects available in market then the selection becomes
difficult. There are several factors which should be considered in such situation:
profit or revenue is one of them. Every contractor wants to have more profit so they
select the project with more profit. Generally large profit is earned through big
projects instead of smaller ones. For this reason this factor has most influence in
bid/no-bid decision for projects in Pakistani construction industry. ‘Market value’ is
second highly ranked factor having MIR value of 3.51 for impact and 3.51 for
occurrence. According to Pakistani contractors if the market is recessing, firm needs
to bid for more projects. So, they even go for smaller projects available in market.
Similarly, contractors want to bid for projects which have positive market value
instead of the ones with negative market value. The selection is also influenced by
the project fame and advertisement as contractors are more inclined to projects with
more fame and profit regardless of its size. Hence this factor ended up getting more
value. ‘Number of competitors in market’ with MIR value of 2.39 for impact and
3.54 for occurrence along with “availability of similar type of project in market”
with MIR of 2.75 and 3.21 for impact and occurrence respectively were regarded as
moderately important factors in bid/no-bid decision making. The prior is considered

Fig. 118.1 Construction market related factors. Note MIR <1.49 = not important; 1.5–2.49 = less
important; 2.5–3.49 = moderately important; 3.5–4.49 = important; 4.5–5 = very important
118 Strategic Factors Influencing Bid/No-Bid Decision … 1349

least important factor which affects bid/no-bid decision by Pakistani contractors. It

is least important for a contractor to know about how and under which bidding
strategy the opponents are going to bid because it is client who has to select bid
document. So, bid/no-bid decision is dependent upon client’s method of evaluation
of bid instead of competitors in market. ‘Competitors in industry’ was also found
less important factor affecting bid/no-bid decision according to Wanous et al.
(2000), Maqsoom and Charoenngam (2014) and Ma (2011).
The second phase of analysis is related to political factors affecting bid/no-bid
decision of Pakistani contractors. The respondents were asked to rate the variables
using Likert scale (where 1 = not important; 5 = very important). The results for
contractor related factors in bid/no-bid decision of Pakistani contractors are
appended in Fig. 118.2.
‘Change in government policies’ with MIR value of 3.59 for impact and 3.1 for
occurrence is ranked as most important factor in this research. These all political
factors are self-developed for the research. This factor is regarded as most important
because whenever new government arrives, it makes changes to whole structure of
policies. In Pakistan, after every 5 years elections are held and new government is
formed. Every political party has its own policy regarding matters of state including
contracting practices. Whenever government changes, rules and policies in con-
struction industry are also changed which affects contractors a lot. Generally, larger
projects are affected by this type of factor: larger dam usually needs 7–10 years for
its completion. ‘Public acceptance to project’ is ranked as second highest with MIR
value of 3.54 for impact and 3.65 for occurrence in making bid/no bid decision. It is
important for every contractor to know about the project and reaction of public to it.
It is very important for any project that public or locality accepts it. They will only
accept the project if the project after completion will be beneficial to them in one

Fig. 118.2 Political related factors. Note MIR <1.49 = not important; 1.5–2.49 = less important;
2.5–3.49 = moderately important; 3.5–4.49 = important; 4.5–5 = very important
1350 A. Maqsoom et al.

way or another. The success of any project is also dependent on rate at which
people invest or take interest in it. If the project is not locally accepted, ultimate loss
is born by the contractor in terms of money and time wastage causing delays in
project. “Politician reference for gaining award of project’ with MIR value of 2.38
for impact and 2.49 for occurrence is regarded as least important factor in
bid/no-bid decision. Few contractors think that politician reference is essential for
project award but as government is not permanent and it can be changed anytime,
the factor is usually discarded. So there is always a chance of change in government
or its policies which in response affect the completion of project. Using resources
such as political reference to win the bid is not necessary as client demands quality
product and revenue and hence often nullifies such influences.
The third phase of analysis is related to barriers and limitations influencing the
bid/no-bid decisions of Pakistani contractors. The respondents were asked to rate
variables using Likert scale (where 1 = not important; 5 = very important). The
results for barriers and limitations related factors are appended above in Fig. 118.3.
‘Allowed duration for project’ with MIR value of 3.71 for impact and 3.53 for
occurrence and ‘Allowed duration for bid preparation’ with MIR value of 3.5 for
impact and 3.22 for occurrence are considered as most important factors in making
bid/no-bid decision making process in Pakistani construction industry. In general,
most of the projects are completed in time as prescribed by client. In contrast, if a
contractor doesn’t manage to complete the tasks and project in time given by the
client, they face liquidated damages for both time and cost over-runs. This loss
directly impacts the contractor and hence this factor is highly important for con-
tractors. Whenever tender is opened, company might be involved in other different
projects or tasks. Due to this reason, firm or contractor is not in a position of making
effective bid document for securing new project as they need enough time to

Fig. 118.3 Barriers and limitation related factors. Note MIR < 1.49 = not important; 1.5–
2.49 = less important; 2.5–3.49 = moderately important; 3.5–4.49 = important; 4.5–5 = very
important
118 Strategic Factors Influencing Bid/No-Bid Decision … 1351

prepare their bid documents to win more projects and earn more profit. ‘Technical
difficulties in project’ with MIR value of 2.38 for impact and 3.14 for occurrence
along with ‘Not properly managed bid documents’ having MIR value of 2.78 for
impact and 3.5 for occurrence, affect bid/no-bid decision respectively. The prior is
considered as least important and lowest ranked factor because bid document is not
affected by technical persons in firm as per opinion of contractors. Technical and
skilled persons are required during project to manage tasks and schedule the work
effectively. Skilled persons are required for operating machinery etc. but are not
required in bid documentation phase. Hence, technical difficulties are not that
critical factor to be worked upon on initial basis when going for bid.
Fourth phase of the analysis is related to the site related factors influencing the
bid/no-bid decision of Pakistani contractors. The respondents were asked to rate
variables using Likert scale (where 1 = not important; 5 = very important). The
results for site related factors are appended in Fig. 118.4. ‘Unforeseen site condi-
tion’ with MIR value of 3.70 for impact and 3.56 for occurrence, and ‘Geological
conditions’ with MIR value of 3.54 for impact and 3.51 for occurrence are con-
sidered as most important factors by Pakistani contractors.
Before bidding, contractor checks site condition to confirm if they are favorable
for construction work or not, as unexpected damage can cause huge cost and time
delays. Thus site condition plays a vital role in completion of a project. If conditions
are favorable, contractor will go for a bid and can complete the project in time
allocated whereas contractors refrains from bidding for project having severe
conditions. ‘Geological system’ is ranked as second most important factor by
Pakistani contractors. Geologic conditions of site are predetermined by nature.
Ground characteristics influence design. The terrain, available medical facilities, as
well as quick and easy access to nearest city in case of works in remote areas are
some of the conditions which must be kept in mind along with geological systems.
‘Uncertainty related to site condition’ with MIR value of 2.45 for impact and 3.13

Fig. 118.4 Site related factors. Note MIR < 1.49 = not important; 1.5–2.49 = less important;
2.5–3.49 = moderately important; 3.5–4.49 = important; 4.5–5 = very important
1352 A. Maqsoom et al.

for occurrence is considered as least important and lowest ranked factor. The
uncertainties can not to be predicted completely but still their outcomes and hazards
can be controlled by taking proper care and precautions such as risk management.
By having qualified and experienced staff in firm, uncertainty or risk associated
with project can easily be managed and mitigated through different plans. So,
impact of this factor on bid/no-bid decision is very low due to which it has a low
rank.

118.5 Conclusions

The aim of this paper is to identify the strategic factors influencing bid/no-bid
decision of contractors and analyze the impact and occurrences of these factors.
Construction market related and political factors are considered critical for both
impact and occurrences whereas barriers and limitations related factors, site related
factors are less important in terms of impacts and occurrences. Among the con-
struction market related factors, number of projects available in market with same
size is considered as highly ranked factor influencing bid/no-bid decision and
market value is the second highest ranked factor. The number of competitors in
market is considered the lowest impact factor in this category for making bid/no-bid
decision. Among political factors, change in government policies is highly ranked
and most important factor. Public acceptance to projects is second highest ranked
factor and moderately important factor influencing bid/no-bid decision in Pakistani
contractors whereas, politician reference for gaining project is considered as least
important factor affecting bid/no-bid decision.
Among barriers and limitations related factors, allowed duration for project is
highly ranked factor affecting most bid/no-bid decision and technical difficulties in
project is lowest highest ranked factor. Among site related factors, unforeseen site
conditions and geological conditions are highest and second highest ranked factors
respectively influencing bid/no-bid decision in Pakistani construction industry
whereas, uncertainty related to site condition is lowest ranked factor in this
category.
The findings of the study have some limitations in form of population and
sample size as it is limited to construction industry and only contractors from
developing country Pakistan. In future, same study can be extended for other
developing and developed countries and the results can be compared for better
understanding.

Acknowledgements The authors would like to pay gratitude to Higher Education Commission
(HEC), Pakistan for funding and supporting this research and Pakistan Engineering Council
(PEC) for providing the list of registered contractors and for endorsing and forwarding the
questionnaire to the Pakistani contractor firms.
 118 Strategic Factors Influencing Bid/No-Bid Decision … 1353

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