A method used for evaluating bids in the chinese

construction industry
K.K. Lai
a,
*, S.L. Liu
b
, S.Y. Wang
c
a
Department of Management Sciences, City University of Hong Kong, 83 Tat Chee Ave., Kowloon, Hong Kong
b
School of International Trade and Economics, University of International Business and Economics, Beijing 100029, PR China
c
Academy of Mathematics and System Sciences, Chinese Academy of Sciences, Beijing 100080, PR China
Received 19 November 2002; received in revised form 30 December 2002; accepted 21 January 2003
Abstract
Firstly, the history of development of competitive bidding systems in China is reviewed. Then, a method for evaluating bids used
in Beijingwhich is based on multiple criteria such as Degree of response to the bid document, Construction organization
design, Firm honor and competence, Bid prices and amounts used of steel, cement and lumber, etcis presented. Thirdly, a
real case in the Beijing construction market is given to demonstrate the method. Finally, some problems on the bidding systems
presently existing in China that are in urgent need of further research are proposed. This paper will benet anyone wishing to deal
with bidding for a project from China.
#2003 Elsevier Ltd and IPMA. All rights reserved.
Keywords: Competitive bidding; Contract administration; Chinese construction industry; Bid evaluation; Multiple criteria; Base number of bids of
projects
1. Review of history of inviting and submitting bids in
China
The Chinese construction industry was formerly
known for its low eciency and eectiveness. Under the
old planned economic system in place before the 1980s,
the Chinese government was not only responsible for
freely providing all of the nances for construction
works but was also responsible for assigning construc-
tion projects to contractors. The contractors were vari-
ous state-owned enterprises or rms and their managers
were not responsible for extensive delays in the planned
schedule, cost overruns, quality problems, and so on.
There was no competition among contractors and
therefore no motivation since the contractors were not
allowed to make prots as the construction industry was
considered to be a nonprot-making sector of the
national economy. The government had to cover all
construction costs.
With the implementation of the open-door policy
from the beginning of the 1980s, the Chinese govern-
ment translated its purely planned economic system into
a market-oriented system within a socialist context to
speed up economic growth by improving the eective-
ness and eciency of economic activities. This national
economy reform policy has greatly promoted competi-
tion among economic sectors. In response to the
national reform programme, a number of reform poli-
cies have been implemented in the Chinese construction
industry. In particular, competitive bidding methods
have been introduced into the industry to supplement
and gradually replace the previous assignment system
for the procurement of construction projects. The major
objectives of applying competitive methods are to
improve the eectiveness of construction investment
and to move the Chinese construction market towards
international procurement practices [1].
To improve eectiveness and eciency within its
construction industry, since 1981 the Chinese govern-
ment has been actively introducing competitive bidding
approaches by setting up a series of guidelines and reg-
ulations. Through the implementation of these policies
the government aims to achieve two objectives: (1) to
0263-7863/03/$30.00 # 2003 Elsevier Ltd and IPMA. All rights reserved.
doi:10.1016/S0263-7863(03)00009-7
International Journal of Project Management 22 (2004) 193201
www.elsevier.com/locate/ijproman
* Corresponding author. Tel.: +852-2788-8563; fax: +852-2788-
8560.
E-mail addresses: mskklai@cityu.edu.hk (K.K. Lai), slliu@uibe.
edu.cn (S.L. Liu), sywang@iss02.iss.ac.cn (S.Y. Wang).
change the project nancing arrangement from tradi-
tionally governmental-free allocations to loans from
commercial banks; and (2) to change the project pro-
curement system from governmental assignments to
competition through competitive bidding systems [1].
On 17 October 1980, the State Council issued the
Provisional Regulations on Developing and Protecting
the Socialist Competition, which specied that pro-
curement of some construction projects suitable for
contracting can be tried out through competitive bid-
ding systems. This was the rst governmental document
to propose implementing competitive bidding systems
[2].
In 1981, the rst experiments were made to apply the
competitive bidding systems to the procurement of
public construction projects in both Shenzhen and Jilin
cities in China. These competitive bidding experiments
have been proved to have achieved great economic and
social eects as well as prots. For example, in the
experiment made to invite tenders for the procurement
of the International Business Building Project, whose
construction area was 5,200 m
2
, 9,644,000 yuan were
saved and completion time reduced by half a year as a
result of consulting Hong Kongs competitive bidding
experience [3].
On 7 June 1983, the Ministry of Urban and Rural
Construction printed and distributed the Provisional
Method for Inviting and Submitting Bids for Construc-
tion Installation Works. This method stipulated that
any construction installation work, if approved by the
nation, the province and municipality, or the autono-
mous region, should be awarded to the best construc-
tion company picked out through the above-mentioned
method [4].
On 18 September 1984, the State Council issued the
Provisional Regulations on Some Problems in Reform-
ing both the Construction Industry and Fundamental
Construction Administration System. This document
proposed pursuing competitive bidding systems for con-
struction projects, reforming the old methods for assign-
ing construction projects by means of pure administration
and applying competitive bidding systems [5].
On 14 June 1985, the former State Planning Commit-
tee and the Ministry of Construction jointly issued
Provisional Regulations on Inviting and Submitting
Bids for Construction Project Design, which stipulated
that any large and medium-sized construction projects
should be awarded by construction owners or the con-
sulting company appointed by the construction owners
through competitive bidding systems and that any
organizations with design certicates, such as state-
owned enterprises, collective and individual enterprises,
could participate in bidding for projects for which they
had been approved as being suitably qualied [6].
On 30 December 1992, No. 23 Decree Ministerial
Document of the Ministry of Construction issued
Management Methods of Inviting and Submitting Bids
for Construction Projects Construction. This method
stipulated that any newly built or rebuilt projects, pro-
jects to be expanded, and technology transformation
projects to be nanced by the government, publicly
owned enterprises or institutions should be procured
through the management method mentioned above [7].
On 8 November 1996, the Ministry of Construction
issued Document Model for Inviting Bids for Con-
struction Projects, which normalized the procedure for
inviting bids and guaranteed the normalization, com-
pleteness and accuracy of the document for inviting
bids. In particular, the PRC Construction Law became
formally eective on 1 March 1995. The invitation and
submission of bids for construction projects is an
important part of this law. This law provides legal safe-
guards for promoting application of the bidding system
to construction projects in China [8].
On 6 August 1998, the Ministry of Construction
issued Regulations on Management of Further
Enhancing to Invite and Submit Bids for Construction
Projects, which further explicitly species those pro-
jects which should be awarded through the open com-
petitive bidding process [8].
In particular, the PRC Law of Inviting and Submit-
ting Bids was adopted through three phases by the 11th
Session of the Standing Committee of the 9th National
Peoples Congress on 30 August 1999 and took eect
from 1 January 2000. In the rst phase (from June 1994
to July 1996) the Law was drawn by the State Planning
Committee and submitted to the State Council. In the
second phase (from June 1996 to March 1999) the Law
was examined and approved by the State Council and
submitted to the Standing Committee of the National
Peoples Congress. In the last phase, the Law was
examined and approved by the Committee of the
National Peoples Congress. The Law is one of impor-
tant pieces of legislation regulating market activity. Its
construction and issue are important events in Chinas
economic activity, and the Law is also an important
milestone in procurement market administration. The
Chinese government is promoting the system of invita-
tion and submission of bids through the Law and
requires that fundamental facilities, public facilities,
construction projects (including the projects survey,
design, construction and supervision) and important
equipment and materials relevant to the projects should
be awarded through the system of inviting bids if the
scales prescribed by the State are reached [9].
In recent years, competitive bidding administration
work has been commonly enhanced over the whole
country. As a result of economic reforms, high-speed
economic growth has brought Chinas construction
industry favourable development opportunities. Thus a
fast growing, protable and relatively open construction
market has been developed.
194 K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201
Since its introduction, the Chinese construction
industrys competitive bidding system has developed
rapidly within a short period. By the end of the 1990s,
applications of the bidding system become very popular
over the whole country. Bidding systems have been
applied not only to the construction and implemen-
tation of projects in the construction industry, but also
in other elds such as design procurement, material
supply, labour force, project supervision, electrical and
mechanical equipment supply. Many researchers,
including governmental ocers, supervisors, engineers,
designers and professors specializing in operations
research or management sciences in academic institutes,
universities and colleges have begun to study competi-
tive bidding systems suitable for use in Chinas market-
oriented economy. Since the 1980s, a number of books,
journal papers and reports on bidding have been pub-
lished internally and internationally [1015].
In particular, three Chinese journals on competitive
biding have been founded. One is Zhong Guo Zhao
Biao (China Tendering) [16], which is supervised by the
State Economics and Trade Committee of the Peoples
Republic of China and sponsored by the China
National Electrical and Mechanical Equipment Ten-
dering Centre. This journal is also published in English.
It provides domestic and foreign companies with pro-
curement bid information on equipment, materials and
projects, thus creating public, fair and competitive
opportunities. It also issues bid information on World
Bank loan projects. It introduces international and
domestic trends and information on the economy, tech-
nology, trade and the market. Sixty issues are published
each year (ve issues a month). The rst issue in every
month is devoted to policies and theories, and the
remaining four issues to domestic and international bid
information. Specically, the rst issue introduces Chi-
nas economic policies, laws and regulations, and tender
and bid details to readers, provides discussions on spe-
cial topics in tendering and bidding, and helps readers
improve tendering and bidding techniques through its
various columns such as Policies and Legislation, Ten-
dering and Bidding Forum, Analysis of Economic
Operations, Winning Firms and Products, Domestic
and Foreign Economic Information, and Communi-
cation Information between the Mainland China and
the Taiwan Straits. The remaining four issues (the bid
information issue) are published once a week and pro-
vide practical economic information such as procure-
ment announcements, earlier notices and winner
announcements on equipment, materials and procure-
ment of various projects including machinery, electron-
ics, chemical products, electric power, communications,
telecommunications, water quality maintenance, agri-
cultural environmental protection, public health, edu-
cation, roads, bridges, infrastructure facilities, project
construction and modern science and technology.
Another relevant journal is Jian Zhu Shi Chang Yu
Zhao Tou Biao (Journal of Construction Market and
Tendering) [17], which is supervised by the Ministry of
Construction of Peoples Republic of China and
sponsored by the Research Society of Construction
Market and Bidding of the Society of Civil Engineering
of China. This monthly journal is oriented towards and
focused on the construction industry in China. It
attempts to give publicity to, introduce and report
guidelines and policies, statutes, information and
experience, and current regulations and practices on the
international market. It is published monthly. The third
journal, entitled Jian Zhu Jing Ji (Construction Econ-
omy) [18], also publishes many papers on tendering and
bidding. It is sponsored by both the Construction
Economy Committee of the Construction Society of
China and the Institute of Construction Economy of the
Centre of Development of Construction Technology.
However, most of the research results and information
on tendering and bidding provided by Mainland China
are published internally.
In the rest of this paper, we introduce a method for
evaluating bids widely used in the construction industry
in Beijing [19]. Also a real case study from Beijing con-
struction market is presented in detail. Finally, some
problems on bid evaluation are presented for the future
research.
2. Methodology for evaluating bids
A provisional quantitative methodology for evaluat-
ing construction project bids was developed in 1998 and
used for evaluation of open and invited bids in the
Beijing construction market [19]. This methodology
specied that the committee for evaluating bids organ-
ized by construction owners or an agent appointed by
the owners is mainly responsible for bid evaluation or
contractor selection. The committee is composed of the
employed experts and the representatives of both the
construction owner and middle agent (if needed). The
committee should be composed of an odd number of
commissioners and comprises more than ve persons.
Invited experts should make up no less than two-thirds
of all the commissioners. The bidder with the maximum
points is awarded the construction project. Bids are
opened, evaluated and selected under supervision of the
Administration Oce for Inviting and Submitting Bids
for Construction Projects of Beijing.
The procedure, process and illustrations for bid eval-
uation can be summarized as follows. The bid eval-
uation is made based on six important aspects (or
criteria): (1) Degree of response to the bid document;
(2) Construction organization design; (3) Firms hon-
our and competence; (4) Bid prices and the amounts
used of three materials (steel, cement and lumber); (5)
K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201 195
Range for reducing cost; and (6) Comprehensive eval-
uation and examination. All the bidders should be
evaluated by all the commissioners based on the above
criteria.
2.1. Degree of response to the bid document
The criterion Degree of response to the bid docu-
ment is subdivided into two sub-criteria: quality stan-
dard and time submitted. Their qualication methods
are described in Table 1.
2.2. Construction organization design
The criterion Construction organization design is
subdivided into ve sub-criteria. See Table 2 for their
qualication methods.
2.3. Firm honor and competence
The criterion Firms honour and competence is
subdivided into six sub-criteria (see Table 3). The six
sub-criteria are evaluated as below:
The level of qualication of the rm is judged
by the committee.
Honour titles of projects honourably earned by
the rm refer to two honour titles. One is
Honour Titles of the Ministry of Construction
(including the LUBAN prize) awarded by the
PRC Ministry of Construction. Another is
Honour Titles at Municipality-Level awarded
by relevant departments in Beijing. The honour
certicates are valid for bid evaluation within 5
years from the issued date. Each Ministry-Levels
honour title is assigned ve points and each
municipality-level assigned four points. In addi-
tion, when a construction project simultaneously
won the two honour titles, the points for this sub-
criterion is only assigned according to the highest
honour title. The total points obtained from the
above two honour titles can not be greater than
the maximum number of 20 points.
Level of qualication of project manager is
assessed according to the relevant regulations
issued by the PRC Ministry of Construction.
Construction experience in similar projects
Table 1
Points for degree of response to the bid document (100 points)
No. Criteria Maximum points Evaluation Points Note
1 Quality standard 50 To promise the construction owners quality requirements 50
Not to promise the construction owners quality requirements 0 Bid cancelled
2 Time 50 To promise the construction owners time requirements 50
Not to promise the construction owners time requirements 0 Bid cancelled
Table 2
Points for construction organization design (100 points)
No. Criteria Maximum points Evaluation Points Note
1 Construction scheme 45 Advanced 3645 If the number of points assigned to a
bidder with respect to this criterion is
less than 60, the bid is rejected
Feasible 2635
Unreasonable 0
2 Quality guarantee
system and its measures
20 The guarantee system is complete and the
measures are powerful
1620
The guarantee system is more complete and the
measures are normal
1115
The guarantee system and the measures are poor 510
3 Safety measures 10 Perfect and trustworthy 610
Imperfect 05
4 Plans for labour force
and the amounts used
of main equipment and
materials
10 Reasonable 610
Unreasonable 05
5 Construction scheduling
plan and its guarantee
measure
15 Reasonable 1115
Unreasonable 510
196 K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201
refers to whether the bidding rm has con-
tracted and constructed projects that are
similar with the owners project in construction
scale (construction area, number of layer and
height of eaves), the form of structure and
function.
Qualied and excellent percentages of projects
completed in recent 2 years are provided by
Beijing Quality Inspection Bureau.
Percentage of keeping time promise needs to
be certied and conrmed by relevant real sup-
port documents.
2.4. Bid prices and amounts used of three materials
Suppose that there are n bidders. Denote by b
i
the bid
price submitted by bidder i. Before being evaluated and
scored, all the bid prices (b
i
s) are rstly compared with
the base number of bids of the project (denoted by b
0
).
The base number of bids is calculated, checked and
ratied by the construction owner or the agent appoin-
ted by the construction owner. This is designed to be
suitable for the current state of development in the
construction market and the current national conditions
prevailing in China. It reects the tendering and bidding
systems with Chinese characteristics. It is not only the
foundation on which the construction owner controls
investment but also an important reference point by
which the relevant departments responsible for the
invitation and submission of bids prevent unfair com-
petition. Currently, it is dicult to judge how reason-
able it is to award the project to the lowest bidder if the
base number is cancelled. To some extent, the base
numbers on which bidders are evaluated can ensure
eectiveness and fairness of letting construction project.
However, as Chinas construction market gets more and
more perfect, the base number can be nally cancelled
in order to meet international practice [20].
A bid price (b
i
) submitted by bidder i is considered
valid if (b
i
b
0
)/b
0
is within an interval of [5%, 5%].
All the valid bid prices (b
i
s) and b
0
are integrated as a
special bid price (denoted by b
c
and called the composite
bid price) as follows:
b
c
0:4b
0
0:6b
a
1
where b
a
is an average of all the valid bid prices. The
above composite bid price (b
c
) is used to score all the
valid bid prices (see Tables 46).
If there is only one bidder with a valid bid price, then
whether or not this bidder is awarded the construction
project depends on evaluation of the bidder with respect
to the rst three criteria. The case without valid bid
prices will be handled according to the relevant detailed
rules and regulations of Provisional Method for Man-
agement of Inviting and Submitting Bids for Construc-
tion Projects in Beijing.
The three materials (steel, cement and lumber) are
scored in the similar way as used for the valid bid prices.
For example, the amount used of steel calculated,
Table 3
Points for the rms honour and competence (100 points)
No. Criteria Maximum points Evaluation Points
1 Level of qualication 30 Level 1 30
Level 2 25
Level 3 20
2 Honour title(s) for project(s)
earned by the rm
20 Won a honour title awarded by The Ministry of Construction (PRC) 20
Won a municipality-level honour title 20
3 Level of qualication of project
manager
15 The rst level 15
The second level 10
4 Experience in similar projects 10 Have 10
None 0
5 Qualied and excellent percentage
of projects in recent two years
15 100% qualication among which more than 65% is excellent. 15
100% qualication among which more than 40% is excellent. 10
Less than 100% qualication 0
6 Percentage of keeping time promise 10 More than 90% (including 90%) 10
Between 80 and 90% (including 80%) 5
Less than 80% 0
Table 4
Points for bid prices and the amounts used of three materials (100
points)
No. Criterion Maximum points Points
1 Bid price 90 See Table 5
2 Amounts used of 10 6 Steel
three materials 3 Cement See Table 6
1 Lumber
K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201 197
checked and ratied by the construction owner or an
agent is called the base number of the amount of steel
used (denoted by s
0
). The composite amount of steel
used (denoted by s
c
) is dened and computed as:
s
c
0:4s
0
0:6s
a
2
where s
a
is an average of all the valid amounts of steel
used. The valid amounts of steel used refer to those
amounts corresponding to the valid bid prices, respec-
tively. The composite amount of steel used (s
c
) is used to
score the valid amounts of steel used (see Table 6).
Similar statements hold true for the other two materials
(cement and lumber).
2.5. Range for reducing cost
Range for reducing cost refers to cost reduction
range promised by the bidders through practical and
feasible technical measures and managerial measures.
The bid evaluation committee justies and hence scores
the above measures and the above proposed cost
reduction range (see Table 7).
2.6. Comprehensive check and evaluation
Points for comprehensive check and evaluation
should reect the comprehensive ability of the bidding
rms and is summarized in Table 8.
2.7. Integration of the points of all the criteria with their
weights
Denote the ve commissioners by E
q
, the n bidders by
B
i
, and the six criteria by C
j
, q=1, 2, 3, 4, 5, i=1, 2, . . .,
n, j=1, 2, 3, 4, 5, 6. Suppose that commissioner E
q
assign P
ijq
points to bidder B
i
with respect to criterion
C
j
. Denote the weight vector of the rst four criteria by
(K
1
, K
2
, K
3
, K
4
) which is predetermined as (0.1, 0.1, 0.2,
0.5) satisfying
P
4
i1
K
i
0:9. Thus, bidder B
i
s integrated
total points is computed by [19]
T
i

X
4
j1
K
j
Pi
j
P
i5
P
i6
3
where P
ij

X
5
q1
P
ijq

=5 is an average of all the
points P
ijq
s, q=1, 2, 3, 4, 5, j=1, 2, 3, 5, 6, and P
i4
is the
points assigned to bidder B
i
with respect to criterion C
4
and computed according to Tables 46. In other words,
P
i4
=p
i
b
+p
i
s
+p
i
c
+p
i
l
, where p
i
b
, p
i
s
, p
i
c
and p
i
l
are the points
assigned to bidder B
i
with respect to the four sub-criteria
Table 5
Points of valid bids (90 points)
Range of (b
e
b
c
)/b
c
(1, 5%) [5%, 4%) [4%, 3%) [3%, 2%) [2%, +1%]
Points for valid bid (b
e
) 0 75 80 85 90
Range of (b
e
b
c
)/b
c
(+1%, +2%] (+2%, +3%] (+3%, +4%] (+4%, +5%] (+5%, +1%]
Points for valid bid (b
e
) 80 75 70 65 0
Table 6
Points of the three materials (10 points)
a
Range of (x
e
x
c
)/x
c
Steel Cement Lumber
Maximum points
6 3 1
Points
[3%, +3%] 6 3 1
[6%, 3%) or (+3%, +6%] 4.5 2 0.75
[9%,-6%) or (+6%, +9%] 3 1 0.5
[12%, 9%) or (+9%, +12%] 1.5 0.5 0.25
a
Where x
e
and x
c
refer to the valid and the composite amount used
of any one of the three materials, respectively.
Table 7
Points for taking measures to reduce the construction cost (3 points)
No. Criterion Standard points Evaluation Points Note
1 1.5 To reduce the cost by more than 1.5% of the base number of bid 1.5 (not including 1.5%)
2 1 To reduce the cost by from 1 to 1.5% of the base number of bid 1 (not including 1% but including 1.5%)
3
Range for
reducing cost
0.5 To reduce the cost by from 0.5 to 1% of the base number of bid 0.5 (not including 0.5% but including 1%)
Table 8
Points for comprehensive check and evaluation (5 points)
No. Criterion Maximum
points
Evaluation Points Note
1 Comprehensive 5 Good 5 The owner is
2 evaluation 4 Better 3 responsible for
3 and examination 3 General 2 evaluation and
examination
198 K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201
(bid price and amounts used of three materials) respec-
tively. These T
i
s are used to rank all the bidders and the
larger T
i
, the more preference for bidder B
i
.
3. A real case study
One owner in Beijing wanted to construct two apart-
ments. Four bidders bid for the two apartments; they
are denoted by B
1
, B
2
, B
3
and B
4
respectively. The bids
were opened on 14 December 1999. The records for this
open bid meeting are shown in Tables 9 and 10.
The base numbers of the bid price, time, area
and amounts used of three materials are shown in the
second row of Table 10.
From Tables 9 and 10 we know that the values of
expression (b
i
b
0
)/b
0
for bidders B
1
, B
2
, B
3
and B
4
are
10.33%, 0.58%, 3.60% and 5.83% respectively. For
example, (b
i
b
0
)/b
0
for bidder B
1
is computed as
(27,577,23630,756,671)/30,756,671=10.33%. Hence,
the bid prices of both B
1
and B
4
are invalid (the total
points respectively assigned to both of them will be zero
later). The other two bidders bid prices are valid.
The composite base numbers of the bid prices and the
amounts used of three materials (denoted by b
c
, s
c
, c
c
and l
c
, respectively) are computed by (1) and (2),
respectively, as shown in the third row of Table 10. For
example, the composite base number of the bid prices is
determined as
b
c
0:4b
0
0:6 b
a
0:4 30; 756; 671
0:6 30; 934; 282 31; 865; 254 =2
31; 142; 529:2:
Similarly, s
c
=1217.4, c
c=
1336.37 and l
c=
237.31.
The points for each bidders bid prices are assigned
according to Table 5. For example, bidder B
2
s bid price of
30,934,282 yuan is assigned 90 points because for bidder
B
2
the expression (b
2
b
c
)/b
c=
(30,934,28731,142,529.2)/
31,142,529.2=0.669%, is within interval [2%,
+1%]. Similarly, according to Table 6 the correspond-
ing amounts used of steel, cement and lumber submitted
by bidder B
2
are assigned 6, 3 and 0.75 points respec-
tively. Thus, the total points assigned to bidder B
2
with
respect to criterion C
4
(the bid price and the amounts
used of three materials) is P
24
=90+6+3+0.75=99.75
points. Similarly, the total points assigned to bidders
B
1
,B
3
, and B
4
with respect to criterion C
4
are 0, 83
(=75+4.5+3+0.5) and 0 points respectively.
The owner, supervised by the Administration Oce
for Inviting and Submitting Bids for Construction Pro-
jects in Beijing, invited ve relevant experts to evaluate
the four bidders. The respective average points of the
four bidders with respect to the other ve criteria from
the ve experts (or commissioners) are computed
according to P
ij

X
5
q1
P
ijq

=5 and shown in the rst,
second, third, fth and sixth columns of the following
matrix:
C
1
C
2
C
3
C
4
C
5
C
6
B
1
100 80 60 0 0 3
B
2
100 90 45 99.75 0 0
B
3
100 80 35 83 0 3
B
4
100 80 35 0 0 3
The integrated total points for bidder B
2
is T
2
=
1000.1+900.1+450.2+99.750.5+0+3=80.875
points according to (3). Similarly, for bidders B
1
, B
3
, B
4
the integrated points are 33, 69.5 and 28 points respec-
tively. Hence, we know that in decreasing order of
Table 9
The records for an open bid meeting
Bidder Bid price (Yuan) Time (Cal day) Quality Area (m
2
) Amounts used of three materials
Steel (t) Cement (t) Lumber (m
3
)
B
1
27,577,236 580 Good 19,125 1141 1377.45 233.47
B
2
30,934,282 496 Good 19,438.6 1197 1346.96 229.11
B
3
31,865,254 550 Good 19,850 1257 1367.62 253.81
B
4
32,548,868 530 Good 20,179.8 1232 1241.44 240.04
Table 10
The base numbers and the composite numbers
Bid price (Yuan) Time (Cal day) Area (m
2
) Amounts used of three materials
Steel (t) Cement (t) Lumber (m
3
)
Base number 30,756,671 584 19,439.1 1203 1305 231.09
Composite base number 31,142,529.2 None None 1217.4 1336.37 237.31
0
B
B
@
1
C
C
A
K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201 199
preference the bidders are B
2
, B
3
, B
4
, and B
1
, and the
owner will be recommended to award the construction
project to bidder B
2
.
4. Further discussion
We present a method for evaluating bids widely used
in Beijing. However, we conclude that the method is
insensitive to an important criterion Bid prices,
amounts used of the three materials. The reason for this
is very simple (see Tables 46). As long as the dierence
between any valid bid prices and the composite bid price
divided by the composite bid price belongs to the same
interval (5%, 4%), these bid prices will be assigned
the same points (75 points). Similar results hold true for
the amounts used of the three materials. Thus, further
research is needed to overcome this insensitivity.
Other similar but slightly dierent methods for bid
evaluation are adopted in other municipalities, pro-
vinces or regions in China. For example, in Tianjin
seven criteria are used to evaluate bids [21]. These are bid
price, quality, time, construction organization design,
rms honour and competence, the level of qualication
of the rm and project manager, and the rms construc-
tion history (including quality, safety record and punish-
ment for illegal acts). The maximum points assigned to
these seven criteria are 60, 2, 2, 10, 15, 5 and 6 points
respectively. However, the amounts used of three materi-
als are not involved in evaluating bids in this method.
Before competitive bidding was introduced to China,
the Chinese government tried to battle corruption in the
construction industry. Open bids are encouraged to
avoid shady deals; trading centres have been established
by prefectural-level cities for opening bidding on con-
struction projects. As a result, the number of reported
corruption cases involving the construction industry has
begun to decline.
In addition, with the Chinese construction market now
open to the foreign contractors, the current methods used
for evaluating bids, which were once suitable for national
construction market, no longer work. Hence, there is an
urgent need to develop other methods for evaluating bids
submitted by both international and internal contractors.
Diverse tendering and bidding systems are adopted in
China and any one industry may apply dierent ten-
dering and bidding systems to its dierent elds. Hence,
the construction industry and other industries still have
long way to go to develop perfect methods for evaluat-
ing bids to suit for dierent situations.
Acknowledgements
This work was supported by a grant from the
National Natural Science Foundation of China (project
number 79800006) and a grant from the Research Grant
Council of the Hong Kong Special Administrative
Regions (project number 9050168). The authors are
extremely grateful to Xianguo Shen, Senior Engineer,
the Certied Public Supervisor and the Director of the
Department of Inviting Bids of the Beijing Construction
Market Administration Oce for Inviting and Submit-
ting Bids for Construction Projects who directly con-
tributed or collected the information on which this
paper is based. We wish to thank IJPM Editor Pro-
fessor J. Rodney Turner and two anonymous referees
for their comments upon an earlier version of this.
References
[1] Shen LY, Song WG. Competitive tendering practice in Chinese
construction. Journal of Construction Engineering and Manage-
ment 1998;124(2):15561.
[2] Provisional regulation on developing and protecting the socialist
competition. Beijing (PRC): The State Council; 1980.
[3] Liu Z, Jiang H. The present situation of construction project
bidding in China and its development trends. Construction
Economy 1997;9:710.
[4] Provisional method for inviting and submitting bids for con-
struction installation works. Beijing (PRC): The Ministry of
Urban and Rural Construction; 1983.
[5] Provisional regulation on some problems in reforming both the
construction industry and the fundamental construction admin-
istration system. Beijing (PRC): The State Council; 1984.
[6] Provisional regulation on inviting and submitting bids for con-
struction project design. Beijing (PRC): The State Planning
Commission and the Ministry of Construction; 1985.
[7] Management method of inviting and submitting bids for con-
struction projects implementation. Decree no. 23, ministerial
document. Beijing (PRC): The Ministry of Construction; 1992.
[8] Nian FL. The current state and normalization problem in con-
struction market and construction works bidding in Mainland of
China. Journal of Construction Market and Tendering 1999;4:35.
[9] Paraphrase the Law of Inviting and Submitting Bids of Peoples
Republic of China. Beijing (PRC): Department of Policy and
Regulation of the State Planning Commission and Department of
Public Finance of Bureau of Legal System of the State Council,
Chinese Plan Press; 1999.
[10] Liu SL, Lai KK, Wang SY. Multiple criteria models for eval-
uation of competitive bids. IMA Journal of Mathematics Applied
in Business and Industry 2000;11(3):15160.
[11] Liu SL, Wang SY, Lai KK. A multiple attribute decision
approach for bid/no-bid decisions. International Journal of
Operations and Quantitative Management 1999;5(1):110.
[12] Liu H. Legislation for tendering in China and international ten-
dering practice. Journal of Construction Market and Tendering
1995;3:1922.
[13] Lu Q. Competitive tendering methods for construction project
contracts. Shenyangm (China): Liaolin Science and Technology
Publications; 1985.
[14] Construction project tendering and contract administration.
Beijing (PRC): National Text Book Editorial Commission, China
Construction Industry Publications; 1995.
[15] Excellent Thesis on Construction Market and Bidding of Seven
Provinces and Cities, In: Proceedings of the First Conference on
Construction Market and Bidding of Seven Provinces and Cities,
Editorial Department of Construction Market and Bidding, 1999.
[16] China Tendering (a journal), supervised by the PRC State
200 K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201
Economics and Trade Commission and sponsored by China
National Machinery and Electric Equipment Tendering Center,
from 1995 to the present.
[17] Jian Zhu Shi Chang Yu Zhao Tou Biao (Journal of Construction
Market and Bidding), supervised by the PRC Ministry of Con-
struction and sponsored by Research Society of Construction
Market and Bidding of the Society of Civil Engineering of China,
from 1994 to the present.
[18] Jian Zhu Jing Ji (Construction Economy), sponsored by the
Construction Economy Committee of Construction Society of
China and the Institute of Construction Economy of Center of
Development of Construction Technology (Monthly), from 1985
to the present.
[19] Provisional quantitative method for evaluating bids submitted
for apartment construction projects. Beijing (PRC): The Beijing
Construction Market Administrative Oce for Inviting and Sub-
mitting Bids for Construction Projects; 1998.
[20] Summary of seminar in carrying out Law of Contract and
Law of Inviting and Submitting Bids. Dalian (Liaoning
Province): Association of Cost Administration of Construction
Projects of China, and the Branch Association of Construction
Market and Tendering and Bidding of the Society of Civil
Engineering of China; 1999.
[21] Method for inviting, evaluating and awarding bid. Tianjin:
The Administration Oce for Inviting and Submitting Bids
for Construction Projects of Tianjin Municipality; 1999.
K.K. Lai et al. / International Journal of Project Management 22 (2004) 193201 201