The effect of bidding success in construction bidding

Purpose

Winning a bid will carry implications for capacity level of a construction firm. This paper aims to examine the impact of a winning bid on contractors' bid pricing strategies.

Design/methodology/approach

In identifying the specific types of bidding trends before and after a winning bid, the variations in bids are expressed as a function of time relative to winning bid – the “event” of interest in this study – using a piecewise mixed effects model. The bids analysed comprised series of bids with a winning bid in between, recorded from Hong Kong building contractors.

Findings

The results show that there is a relationship between bid price and bidding success. The bidders in general bid low for time periods before a winning bid and they are less competitive in time periods after a winning bid. However, by considering the individual bidders' characteristics that relate to differences in bidding competitiveness, it is shown that there is remarkable heterogeneity among the bidders in bid pricing decision for pre‐ and post‐winning periods. Nevertheless, the statistically significant bidding trends before and after a winning bid strengthen the notion that systematic changes in bidding behaviour over time do occur in reality in response to changes in firm capacity level.

Originality/value

This empirical investigation provides strong evidence on the systematic changes in bidding behaviour over time in response to changes in firm capacity level, supporting the need to incorporate firm capacity level in the future development of a suitable theoretical framework on construction bidding.