A Bid Mark-Up Multi-Factor Evaluation Process Bidding Strategy in Egypt

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Volume 6, Issue 10, October 2018 ISSN 2321-645X
A Bid Mark-up Multi-Factor Evaluation

Process Bidding Strategy in Egypt
Ibrahim M. Mahdi 1, Mohamed Elmikawi 2, Sherin Y. Ahmed 3
1
Professor, Construction Dep., Faculty of Engineering Future University, Cairo, Egypt.
2
Assistant professor, Construction Dep., Faculty of Engineering, Ain Shams University, Cairo, Egypt.
3
Ph.D. student, Faculty of Engineering, Ain Shams University. Cairo, Egypt.
Abstract
A Construction contracting is the ability to bid-successfully. Winning tender and making profit is a sustainable target for any
contactor to survive in construction sector. While there are different methods for bid pricing in estimating direct and indirect
costs, there are fewer tools for estimating proper mark-ups percentage. Therefore, the decision of proper bid mark-up's
percentage is vital in winning the tender. Meanwhile, the contractor can cover contingency and keeping its bid at a competitive
level with the possibility of achieving maximum profit. Bid markup decision in construction projects is a complex adaptive
process. Therefore, it requires significant experience and market knowledge. The problem is getting worth in case of the
economic reform in developing countries such as Egypt. This economic reform initiative lately undertaken by the Egyptian
government coupled with the ambitious development programs of infrastructure and the development of several new cities
which means additional variables that increase the complexity. These variables include high inflation, currency exchange
changes, economic instability, removal of subsidies and compressed construction deadlines. The objective of this paper is to
develop a decision support system (DSS) to generate the optimum bid markup. Many factors which may impact the decision
process either quantitative or qualitative are identified and evaluated using Delphi technique for reality seeking. Then Analyze
the retrieved factors with step wise regression statistical technique to generate highly impact factors. The DSS consists of three
modules, first the Financial forecast module then using the Analytic Network Process (ANP)-Relative Module and the Rating
Module. Finally, generate the optimum bid markup among Alternatives. The main finding in this paper is the minimum
alternative, summation of the cost of finance and inflation finance percent, the Priorities of significant factors, which include
need to work, project complexity, markup inflation, the risk involving owing contract, economic and competition- market
environment. The result of this study improves and assess contractor’s ability to enhance their documentation system and
estimating process to deal with various bidding evaluation conditions.
Keywords: bid Markup, Decision support system, inflation, Delphi, Competitive tender, ANP.
1. INTRODUCTION
Construction industry is considered as a main indicator for economic growth in developing countries such as
the Middle East countries specially Egypt over the last decade. Rapid development in the construction industry
is significance in its strengthening and progressing of building urbanization.
Construction companies play a prominent role in economic activity by their contribution to the implementation of
major construction projects, such as the development of new cities across the country including a new Capital, a
massive infrastructure program, power plants, infrastructure, roads & bridges and significant housing program to cope
population increase.
In recent years, Egypt faced many economic and political challenges, which had direct impact on the construction:
• Global crises (the global financial crisis in 2008 and the European crisis in 2011).
• Local crises following the events of the political changes in 2011
• Egyptian currency floatation in November 2016
• Implementation of Value Added Tax (VAT) 2016
• Reduction of government subsidies (utilities, fuel, etc.)
• Change money value over time
All the above factors have had impact on construction costs and consequently construction companies. Hence, the
significant economic reform program that is being undertaken by the Egyptian Government. Which in turn increase the
need of developing a new bidding strategy to adapt the economic changes. Thus, decide bid mark-up during the bidding
Volume 6, Issue 9, October 2018 Page 1

stage has become increasingly important. This complicated combined process integrates cost estimation and decision-
making process that involve bidders' objective on achieves the balance between the winning a tender and the maximum
profit as much as possible. it is necessary to consider the following issues when developing a competitive bidding
strategy model that is suitable for use in practice:
• A wide range of factors influencing bid markup.
• Quickness to cover the short bidding preparation period under enormous pressure.
• Lowest responsible bidder awards the contract.
The objective of this paper is to develop a generic approach of multi-factors evaluation process to assist contractors in
contract awarding, by deciding an optimum bid mark-up percent for their projects. Which varies from one construction
bid to another according to its objectives. This decision involves multiplicity of various internal and external factors
that encountered in each financial management decision. Factors considered in markup decision can be classified into
two groups: quantitative and qualitative.
Qualitative Factors enables us to use logic and apply mathematical formulas to compare the data as well as charts to
assist in visualizing the findings.
Quantitative Factors major advantage is that it can be easily analyzed using mathematical formulas.
2. LITERATURE REVIEW
The literature review carried out for this paper illustrated that many researcher’s efforts proposed a various method and
technique in deciding the markup size, which is heuristic in nature based on their experiences, judgments and
perceptions.
1. Identifying various factors influencing bid mark-up decision survey.
An earlier research of Shash and Abdul-Hadi (1992) developed this research and presented 37 factors underlying
the markup size decision, with their relative importance to contractors operating in Saudi. Drew and Skitmore
(1997) further identified several factors affecting competitiveness in bidding focused only on contract type and size.
Therefore, Dulaima and Shan (2002) investigated the factors influencing bid markup decisions of large- and
medium-size contractors in Singaporean contractors, respectively. Yng Ling and Lie (2005) identified the factors
affecting the markup decisions of a profitable contractor in Singapore. Enshassi et al. (2010) analyzed contractors’
bidding decisions in the Palestinian construction industry and concluded that “project durations”, “political
environment” and “terms of payments” are the primary factors controlling the mark-up size decisions of contractors.
In a recent study, El-Mashaleh (2013) reported the importance weights and standard deviations of 53 Jordanian
bidding factors.
From precede literature we note that bid mark-up size decision factors vary from construction project to other according
to the different contractor's objectives depending on environmental, social, cultural, economic, political conditions,
uncertainty, competition and can be differ from countries to other according to geographical regions.
2. Markups researchers survey can be classified into three types:

2.1. Statistical models: for instance, Carr (1983-1987) developed a general bidding model that considers the
influence of the number of bidders on markup and demonstrated how competitive bid analysis can include
resource constraints and opportunity costs. Additionally, Lowe and Parvar (2004) used a logistic regression
approach to modelling contractors’ decisions to bid
2.2. Artificial intelligence-based models: Several bidding models used artificial neural networks to support markup
decisions via a sequence of deep-reasoning steps (Li & Love, 1999; Moselhi, Hegazy, & Fazio, 1993).
2.3. Multi-criteria utility models making with discrete alternatives has started to solve competitive bidding decision
problems (Shi and Zeleny, 2000). Furthermore, as bid-related decisions are highly unstructured, and no clear
rules exist for bidding decisions, Chua, Li, and Chan (2001) devised a case-based-reasoning bidding model. Liu
and Ling (2003) described a fuzzy neural network based on approach that estimate the markup percentage.
Additionally, Christodoulou (2004) presented a methodology for arriving at optimum bid markups in static
competitive bidding environments using neuro-fuzzy systems and multidimensional risk analysis algorithms.
According to Anderson et al (2011), Hosny and Elhakeem (2012) estimate an optimum markup using the
integrated optimum markup approach.

3. METHODOLOGY
Bid price comprises of the direct cost, indirect cost and a mark-up percent of
direct and indirect cost equation (2). The estimated direct cost is the sum of
material, manpower and machine costs of the project plans and
specifications. The indirect cost is the sum of all costs which are traceable to
the project and which are not traceable to a single activity is job overhead.
Finally, bid mark-up percentage of the estimated bid price to account for
profit and contingencies as shown in figure1
Figure1: Bid price division example
C= Direct cost+ Indirect cost [1]
B optimum=C*(1+Markup optimum % [2]
Markup optimum % = (B optimum /C) -1 [3]
Markup optimum % = Net profit% + Contingency % [4]
Where B is the bidding cost, C is the project cost.
Deciding the optimum mark-up that provide high chance to win the contract in competitive tender, interested bidders
should prepare the bidding documents (technical and financial). Moreover, tender evaluation based on the “lowest
responsible bidder” is awarded the contract and that bidders strive for an optimum bid value, one that would result in a
bid that is low enough for a bidder to win over competition and whilst high enough to cover contract costs, Service,
contingency and yield a profit. Especially those who are planning to enter Egyptian's construction firm. Methodology
associated process guides contractors considering the more important relevant factors and choosing of an alternative of
optimum markup size. This study concerns in real estate residential building projects.
1. Bid markup Factors identification

Identification is the process of finding, recognizing, and describing impacted factors on markup pretender stage.
Determine which factor may affect this markup decision in Egyptian construction firm. A questionnaire survey is a
widely accepted method of data collection, particularly for descriptive purposes, within a research study [17].
1.1 The Delphi technique
Delphi technique is an approach for Information Gathering Technique via qualified expert groups to get more reliable
judgments and identifying relevancy. Delphi has been widely used with certain advantages. The experts gave their
experience in judgment if the decision factors are relevant and their relative importance or significance by answering
set of questionnaires that incorporated these factors in two or more rounds. A statistical analysis is carried out for the
judgement of first round and a facilitator provides an anonymous summary of the experts’ forecasts from this round as
well as the reasons they provided for their judgments for re-judgement. Thus, experts are encouraged to revise their
earlier answers.is proposed to be used to identify the most significant factors of markup percent decision. Two rounds of
questionnaires should be conducted to ensure consistency of results if there are no significant differences in the
judgements of these two rounds. If there are significant differences in the judgements the next round should carried out
until there no significant differences in the judgements may recorded. and achieve consensus of specialists in the
Egyptian construction market. Reliability of measures obtained from judgments is questionable and validity are critical
properties of measures in all types of research.
1.2 Survey Participants
All Participants are expert cost estimators specialized in bidding preparation and tender evaluation of large-scale
construction company in Egypt. They are working in construction contract pricing with different years of experience.
1.3 First round (open Questionnaire)
Collecting all factors related to contractor’s markup percent for pricing a construction projects in Egypt. Interview’s
survey was conducted from participants were requested to explore and identify all factors that effect on construction
markup size decision from their own point of view in a separate list. Asked general questions such as what is the
project characteristics factors influencing bid markup decision must take into consideration? Finally, A combined list
was prepared from the participant's answers.
An initial list of data gathering form has revealed upon fifty factors classified into five criteria include relevant sub-
criteria, identified from experts' interviews and literature review of different researchers have argued influence local
contractors’ bid mark-up percent decision.
1.4 Second round
participant asked to revise their earlier answers. Which is proposed to identify the most significant factors of markup

percent decision. This round used a quantitative interview’s participants requested to identify every factor degree of
influencing on markup decision using Likert’s four scale consisting four categories (where one is the lowest influence
of factor significant on markup and four is the highest influence. was adopted where respondents were asked to indicate
the importance of each factor.
2 Factors reduction using stepwise regression
Stepwise regression is an essential technique does multiple regression several times, each time removing the weakest
correlated variable. Which requires two significance levels: one for adding variables and one for removing variables.
The cutoff probability for adding variables should be less than the cutoff probability for removing variables so that the
procedure does not get into an infinite loop. At the end, the variables that explain the distribution best. The only
requirement is data normally distributed (or rather, that the residuals), and there is no correlation between the
independent variables (known as Collinearity).
Ex: the effect of size of project on markup.
2.1 ANOVA analysis

Table1 illustrate the value of (sig=0.000) is less than (α=0.05), so that the model is significant, in other words there are
many independent variables affecting the dependent variable.
Table 1 ANOVA analysis significant test
2.2 Coefficient of determination (R squared)

It is a statistical measure show the ability of the independent variables (total factors) to explain the variations in the
dependent variables (markup). it`s values range between 0 to 1. It is a good indicator if it was close to 1 Preferred to be
used in the case of one independent variable. The amount that R-Squared change if the status of this variable changed.
If the variable is currently in the model, this is the amount the R-Squared value would be decrease if it were removed. If
the variable is currently out of the model, this is the amount the overall R-Squared would be increase if it were added.
Large values here indicate important independent variables. You want to add variables that make a large contribution
to R-Squared and to delete variables that make a small contribution to R-Squared. Preferred to be use in the case of one
independent variable according to the rule:
Where SST, SSR from the table of ANOVA, 0≤R^2≤1
Table 2 Coefficient of Determination
Table 2 present the value of adjusted R squared is 0.998, so it is very good value and we can say that the independent
variables managed to explain almost variation in the dependent variable.
This module is to illustrate the effectiveness a set of top twenty key factors and their relative importance weights is an
initial step toward developing a new technique-based on expert system.
2.3 The final influencing factors
Finally, the highly impacting Twenty factor generate from the statistical analysis which presented in table3. Which we
can utilize in the Developed Decision support system.

Table 3 The Identified Bid markup influencing Factors

OBJECTIVE
GOAL Criteria Sub Criteria
1.1 Economic 1.1.1 Availability of future Project
1. Market Environment 1.1.2 Fluctuation-Project start date
1.2 Competition 1.2.1 Number of competitors
1.2.2 Level of Competitors
2.1 Project Type
2.2 Project Price
Optimum Markup
2.3 Duration
2.4 Location
2. Project 2.5 Complexity
Characteristics 2.6 Site Condition
2.7 Tech. Doc level
2.8 Owner type
2.9 Contract Type
2.10 Contingency
3.1 Need to Work
3.2 Current Work Load
3.3 Uncertainty in Cost Estimation
3. Company Condition
3.4 Availability of Resources
3.5 Financial Stability
3.6 Company Classification
3. Developed Decision
Analysis is break down a problem into its constituent components to study their behavior has been the major tool of
scientific inquiry to test hypotheses then solve problems and generate decision. DSS is a system for decision making
and problem-solving Intelligence with computer-based information system designed for interactive use, that supports
business or organizational decision-making activities to control the sequence of interaction and the operations
performed, which can be intended for repeated used as needed for decision support tasks. DSS features are flexible and
can be altered according to needs providing a helping hand in the work process.
3.1 The Financial Module

Finance point of view wraps up negative cash flow by accurate developed System. Basics and the foundations of
building in any kind of investment in engineering field. Thus, improving connection between real costs and pricing
mechanisms which become essential for effective management. The time value of money during which that money is
tied up in any business decision process, are a crucial financial management. The project cash flow deals with the
whole life of the project not the construction period only. Thus, project cash flow studies the project finance from the
feasibility studies phase till the operation phase.
3.1.1 Cash out

It displays the cumulative expanses costs against project duration, plotted in an s-curve shape.
Input date: Project Cost, Duration, Project Start Date
Output data: Cumulative expanses cash out s-curve as shown in Figure2.
3.1.2 Cash in
The flow of income money from the project’s owner to the contractor is in the form of progress payments. Estimates of
work completed are made by the contractors periodically (usually monthly) and are verified by the owner's
representative. Owners usually retain 10% of all validated progress payment submitted by contractors.
Input date: Advanced payment amount, retention, payback period, first payment date.
Output data: cash-in stepped diagram as shown in Figure2.
3.1.3 Net Cash Flow

The subtract between of cash in and cash out, according to cash flow elements such as advanced payment, payback
period, rate of return presented by the area under curve (positive or negative) to cover shortage of financial cash in of
project as shown in Figure2.

Figure2 Cash Flows Diagram
3.1.4 Cost of finance and inflation finance

The process of determining cost of finance is the add value to the present value (required cash) of invested money
which indicate the future value of money, if invested at an interest rate, during specified period.
FV= PV *(1+i) n
Where FV Future value of money.
PV present value of money or the required liquidity cash during execution.
i interest rate of return par year (IRR).
n loan payment period (year) or the net cash flow negative period.
When the invested period is month
im = (1+iy )^1/m -1
where iy is the effective interest rate /yr
im is the effective interest rate /month
m is the period (period of negative cash)
IRR interest rate of return that is accepted by an individual, an institution, or a company to accept the financial
burden of building a project. Considered between the highest one of the following three value:
 Cost of borrowed money from bank.
 Cost of capital or the composite value for the capital structure of the firm.
Taking into consideration Contingency inflation needed. Inflation is the upward change in price level of goods
and services. Consumer price index (CPI) is the measure of market of goods and services. Constant cash flow is
the current cash flow after inflation added.
The law of contract change price applied in contract clause to cover change in materials, labor, machine. Prices
but don’t cover markup inflation. We then generate the percent considered as a constraint in markup estimation
as a minimum alternative with respect to Time value of money or the mathematics of money by considering Cost
of Finance COF. Falls more to the scientific right on the decision-making spectrum. If the interest of our
investment is less than our cost of finance, then the investment is not profitable to our business.
Finally, financial forecast module enables contractor to assess 'what if' scenarios by changing variables to see
how vulnerable the business is to price changes, staffing levels, exchange or interest rate movements, and other
key drivers.
3.2 Multi Factors Evaluation Process

The Analytic Network Process (ANP) developed the first mathematical theory that makes it possible for decision
maker to deal systematically with this kind of dependence and feedback that improves the priorities derived from
judgments and makes prediction much more accurate. Analytic Network Process’s power lies in using ratio scales to
capture all kinds of interactions and make accurate predictions to deal with engineering economics problems to make
better decisions with expert judgment associated.
Input: Actual measurement subjective opinion (price, weight, satisfaction, experience, etc.)
Output: Ratio scales (from Eigen vectors), consistency index (from Eigen value).
3.2.1 Relative Module

The final retrieved significant factors (twenty factors) from Statistical analysis in previous chapter, which include
contingency factors and profit related factors, are classified into three criteria market environment, company
conditions and project characteristics. Creating connection and links between nodes.as shown in figure 3
(a) Designing the network of decision

A network contains criteria and sub criteria in these
clusters. However, in creating structures to
represent problems. as shown in Figure 3
(1) Clusters present component main objective,
criteria and sub criteria. There -must be at least
two nodes in the other cluster to form a group
that can be compared with respect to the
prospective parent node
(2) Nodes are the markup factors elements

classified into corresponding cluster.
Figure 3 Network Structure components
(b) Links is the process of linking nodes.

There is two types of dependency and two types of influences.
(1) Inner dependency elements in a cluster may influence other elements in the same criteria cluster, loop in
cluster.
(2) Outer dependency elements in a cluster may influence elements in the other cluster.
(3) Bidirectional influence a cycle of two components because they feed back and forth into each other.
(4) Unidirectional Influence, a single powerful network element may influence numerous other elements that
do not influence it in return or influence each other. affect each other (sometimes called loop)
Figure 3 Multi Factors Evaluation Network- Relative module

(c) Judgement (comparison matrix)

The relative importance-value of a decision can be determined using a Table 4 Importance value
fundamental Scale of 1-9, as shown in table 4. Where 1 represents equal
importance and 9 represents extreme importance. Nodes compared to any other
node as long as there is a relation between them represented at one row and one
respective column. The computed eigenvector of elements with respect to their
parent element placed to the column representing the parent element and the rows
representing elements. This influence assessed through paired comparisons with
respect to a control criterion (node). Through questionnaire program it differs from
project to another as individual case according to each project impacting factors
priorities
(1) Matrix
- Super matrix technique synthesizes ratio scales. Each ratio scale is appropriately introduced as a column in a
matrix to represent. the super matrix is composed of several sub-matrices which each column is a principal eigenvector
that represents the impact of all elements in a cluster on each element in another (or the same) cluster, the vector of
priorities is the principal eigenvector of the matrix. This vector gives the relative priority of the criteria measured on a
ratio scale.one often needs to prioritize the influence (importance) of the elements themselves on each other.
- Weighted Super Matrix if the column sum of any column in
the composed super matrix is greater than 1(there are more than
one eigenvector), that column will be normalize.
- Limit matrix the weighted super matrix then raised to a

significantly large power to have the converged or stable values.
The values of this limit matrix are the desired priorities of the
elements with respect to the goal. The local priority vectors
grouped and placed in appropriate positions in a super matrix
based on the flow of influence from one cluster to another, or Figure 4 Super matrix in of a network
from a cluster to itself, as in the loop.
3.2.2. Rating Module

This module utilizing Spreadsheets program interface by which we set the standard relation between each factors and
alternatives. rates alternatives, they must be independent of one another. The presence or absence of an alternative must
have no effect on how one rates any of the others. We call this kind of ranking of alternatives with respect to an ideal
(which is an arbitrarily chosen fixed reference point) absolute
measurement or rating.
(a) Specify Alternatives

Markup Alternatives are predetermined with limited number. Which identified as a list of all possible and desirable
markup percent. Falls more to the scientific right on the decision-making spectrum.
Contingency from past research is between 2%-5% of project cost, max contingency in high risky projects. Markup
range (5%-20%) in real state residential building.
Alternative 1: unbalanced bid that distribute markup ratio not equally on the contract items in the project. Contractors
can benefit from individual price loading by shifting the profit margin to items with high prices. [2] identified that
recent unbalanced bidding models helped increase profits and reduce risk [3].
Alternative 2: min/min: (COF+2%).
Alternative 3: Weak (COF+2%- COF+3%).
Alternative 4: Average (COF+3%- COF+4%).
Alternative 5: High (COF+4%- COF+5%).
(b) Factors Categories and it’s level comparison

Create intensity levels or degrees of variation of each factor for example, excellent, above average, average, below

average and poor. We then pairwise compare them to establish priorities and normalize those priorities by dividing by
the largest value among them, so that excellent would have a value of 1.000 and the others would be proportionately
less. Idealizing the priorities by dividing by the largest assures that intensities belonging to large families do not receive
small priorities simply because there are many of them. Example or residential project type Factor table 5.
Table 5 project type factor’s categories level comparison
High Above Below

Investment Average
2.1 Project type investmen Average Average Priorities Idealized
Building Building
t Building Building Building
High investment
1 3 5 6 8 0.49 1.00
Building
Investment Building 1/3 1 4 5 6 0.28 0.57
Above Average Building 1/5 1/4 1 4 5 0.14 0.28
Average Building 1/6 1/5 ¼ 1 4 0.07 0.14
Below Average Building 1/8 1/6 1/5 1/4 1 0.03 0.07
Figure 5 Project Characteristic’s factors categories level

(c) Rate Alternatives

Rate an alternative by selecting the appropriate intensity level for it on each factor. Even when using a numerical scale,
say 1 to 100, to rate each alternative we must have an intuitive idea of how high or how low an alternative fall and in
the process, we subconsciously make comparisons among different levels on the scale. It is not the exact number
chosen, but the level of intensity of feeling behind where it should fall, up or down, on the scale that matters. Because it
compares the alternatives with respect to a standardized ideal, absolute measurement is normative not descriptive.
4. Model Implementation and case study
Project type is investment residential building.
Project cost: 10,000,000 L.E.
Project duration 3 years or 36 months.
Start date Jan 2017, end date Dec 2019
4.1 Financial Module

4.1.1 Cost of finance
Central bank Interest rate of return is 15%
Advanced payment = 10% of project cost = 1,000,000 L.E.
Required liquidity cash during execution = 1,486,154.93 L.E.
Loan duration = 26 month
Get cost of finance = 2.46%
4.1.2 inflation cost

To have a constant markup at the bidding and at the end of the project
Consumer Price Index (CPI)= 6%/ year
Cost of inflation = 920,851.90 L.E.
Get inflation cost in markup= 0.5%
Get the rate of return (min Alternative) =2.46%+ 0.5%=2.96%
4.2 Multi Factor Evaluation Process

4.2.1 Relative Module
Analytic network process - Super decision software applying pairwise comparison between factors according to project
condition and generate super matrix. retrieve Factors Priorities
Table 6: Pairwise comparison

Table 7 Factors relative priorities
OBJECTIVE
GOAL Criteria Sub Criteria Priorities
Environment
1.1 1.1.1 Availability of future Project 0.0205
1. Market
Economic 1.1.2 Fluctuation-Project start date 0.0521
1.2 1.2.1 Number of competitors 0.0199
Competition 1.2.2 Level of Competitors 0.0191
2.1 Project Type 0.1031
2. Project Characteristics
2.2 Project Price 0.1395

Optimum Markup
2.3 Duration 0.1073

2.4 Location 0.0162
2.5 Complexity 0.0232
2.6 Site Condition 0.0215
2.7 Tech. Doc level 0.0306
2.8 Owner type 0.0487
2.9 Contract Type 0.0306
2.10 Contingency 0.1811
3.1 Need to Work 0.0244
3. Company
Condition
3.2 Current Work Load 0.0197

3.3 Uncertainty in Cost Estimation 0.0420
3.4 Availability of Resources 0.0326
3.5 Financial Stability 0.0355
3.6 Company Classification 0.0323
1.0
4.2.2 Rating Module
Finally, Generate the optimum markup.

A score is computed for an optimum markup by multiplying the priority of the selected intensity times the priority of
the criterion and summing for all the criteria, shown in the Total Score column in Table 8.
Table 8 Alternative Rating Module
The Priorities column is obtained by normalizing the Total Score column by dividing by the sum of the values in it. The
selected intensities for each alternative.
5 RESULTS AND DISCUSSION

In this case, with high degree of competition with need of work the high priority for the min profit to survive in the
construction firm and award the contract as shown in table 7. These decision tools set the new horizon for contractor
selection by raising key processes of decomposing a complex problem to a manageable network structure, eliciting
accurate rating by employing pairwise comparison and consistency measure, and obtaining overall priority vector by
dependent and/or interdependent matrix computations.
Table 7 Part of Priority Rating Alternatives
Finally, Generate the optimum markup.

From table 9 the Optimum markup ratio= Ʃ priorities X Average alternative range
=2.5*0.1345+6.6*0.211+9.6*0.1847+12.6*0.1435+15.6*0.161+18.6*0.1656=10.9%
Table 9 Optimum markup
Bidding strategies vary from contractor to another in competitive tender, have different degrees of sensitivity towards
the factors affecting their markup ratio decisions in their tender such as Uncertainties, competitors and ambiguities.
Setting up the right markup ratio contributes to completing the Project successfully. This research has identified them
and, based on the stepwise regression, determined the most influenced factors causing markup percent variation. Then
decision support system to retrieve the best alternative, represents the expected return, cover contingency and high
probability to award contract. The ratio is the limit between the contractor's desire to raise the profit to achieve the
highest return and his desire to reduce its value. Our model enables the estimators to consider many factors (some of
them of purely qualitative character) that affect both the chance of winning a contract and capacities to deliver and
satisfy the client.
6 CONCLUSION
This research shows the development of a decision support system (DSS) to optimize the markup for construction
projects in Egypt during the volatile economic reform period that the country is going through. The DDS provides a
means to obtain optimum markup for pricing a competitive tender for contractors in Egyptian construction firm. By
identifying, the crucial factors that influence optimization process via the decision support system (DSS) in the short
tender preparation period, to assist contractor decision in achieving the objective of awarding contract and gaining
reasonable profit with economic growth. Engineering economics strategy by choosing among alternative assess
contractors make more deliberate, thoughtful decision-making of markup in competitive construction tender by
identifying decision related factors, gathering, information, and assessing alternative resolutions. This approach
increases the chances of choosing the most satisfying alternative possible. Estimating bid mark-up with respect to the
future value of money and prices fluctuation predicted during execution phase. With the evaluation, many influencing
qualitative and quantitative factors whenever contractor take either decision. Finally, we have a decision support system
that reflect new vision and method to adapt the economic changes whose varies from project condition to another.
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AUTHOR
Sherin Yosr received the B.Sc. in Civil Engineering from Faculty of Engineering-Cairo University in
2001 and M.Sc. degree in construction Engineering management, Faculty of Engineering-Ain Shams
University in 2010, Phd student, Faculty of Engineering- Ain Shams University respectively.
Prof. Dr. Ibrahim M. Mahdi is associated professor of project management at Future University of
Egypt. Mahdi has over 30 years of professional experience in all phases of project management
including Planning; Cost a, Risk management and Project Control. He has been responsible for many
assignments of highly technical projects in Egypt and Kuwait. His experience includes Preparing
tender’s packages; receiving and analyzing tenders, making consultant and contractor
recommendations, issuing, executing and administering contracts; and finally, supervising the
construction to insure quality and schedule requirements are met. Specialties: Assoc. Prof. Project Management and
Project management Consultant.

A Bid Mark-Up Multi-Factor Evaluation Process Bidding Strategy in Egypt

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IPASJ International Journal of Management (IIJM)

Web Site: http://www.ipasj.org/IIJM/IIJM.htm

A Bid Mark-up Multi-Factor Evaluation

Volume 6, Issue 9, October 2018 Page 1

2. Markups researchers survey can be classified into three types:

Volume 6, Issue 9, October 2018 Page 2

1. Bid markup Factors identification

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2.1 ANOVA analysis

Table 1 ANOVA analysis significant test

2.2 Coefficient of determination (R squared)

Where SST, SSR from the table of ANOVA, 0≤R^2≤1

Table 2 Coefficient of Determination

Volume 6, Issue 9, October 2018 Page 4

Table 3 The Identified Bid markup influencing Factors

3.1 The Financial Module

3.1.1 Cash out

3.1.3 Net Cash Flow

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Figure2 Cash Flows Diagram

3.1.4 Cost of finance and inflation finance

3.2 Multi Factors Evaluation Process

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3.2.1 Relative Module

(a) Designing the network of decision

(2) Nodes are the markup factors elements

(b) Links is the process of linking nodes.

Figure 3 Multi Factors Evaluation Network- Relative module

Volume 6, Issue 9, October 2018 Page 7

(c) Judgement (comparison matrix)

- Limit matrix the weighted super matrix then raised to a

3.2.2. Rating Module

(a) Specify Alternatives

(b) Factors Categories and it’s level comparison

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Table 5 project type factor’s categories level comparison

High Above Below

Figure 5 Project Characteristic’s factors categories level

Volume 6, Issue 9, October 2018 Page 9

(c) Rate Alternatives

4.1 Financial Module

4.1.2 inflation cost

4.2 Multi Factor Evaluation Process

Table 6: Pairwise comparison

Volume 6, Issue 9, October 2018 Page 10

Table 7 Factors relative priorities

2.2 Project Price 0.1395

2.3 Duration 0.1073

3.2 Current Work Load 0.0197

4.2.2 Rating Module

Finally, Generate the optimum markup.

Table 8 Alternative Rating Module

5 RESULTS AND DISCUSSION

Volume 6, Issue 9, October 2018 Page 11

Table 9 Optimum markup

Volume 6, Issue 9, October 2018 Page 12

Volume 6, Issue 9, October 2018 Page 13

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