The abstract of my PhD

Here is the abstract of my PhD:

Formal and analytical risk models prescribe how risk should be incorporated in the bidding process. However, the actual process of how contractors and their clients negotiate and agree on price is complex, and not clearly articulated in the literature. Using an ethnomethodological approach, the whole bidding process was investigated in order to gain a better understanding of how contractors arrive at a bid price, and how that price is influenced by the apportionment of risk. This was compared to propositions in 67 analytical risk models for contractors, published by academic researchers since 1971, and significant differences were found. Altogether, about a dozen contractors in the UK (and also a dozen in Ghana) were involved in the doctoral study through interviews and documentary analysis – with a selection of firms allowing the researcher to shadow the whole tender process using participant observation. The study – published in Construction Management and Economics (Laryea, Samuel and Hughes, Will (2008) “How contractors price risk in bids: theory and practice”, Volume 26:9 pp.911-924) – shows how risk is mostly managed through contractual rather than price mechanisms, reflecting commercial imperatives at the time of bidding. From 670 hours of work observed in both firms, the activities involved in a bidding process were estimated as deskwork (32%), calculations (19%), meetings (14%), studying documents (13%), off-days (11%), conversations (7%), correspondence (3%), and travel (1%). Risk allowances of 1-2% were included in some bids. However, assumptions, qualifications and clarifications were the main mechanisms for pricing residual risk, contrary to the price mechanisms suggested in models. Therefore, analytical risk models should address the commercial exigencies involved in bidding, stages and roles involved in pricing risk, and nature of the priced risks in bidding. The findings helps to explain why what actually happens in practice is important for those who seek to model the pricing of construction bids.

REFERENCE:
Laryea, S. (2008) How contractors take account of risk in the tender process: theory and practice, Unpublished PhD thesis, University of Reading.