CONSTRUCTION BID MODEL FOR RESIDENTIAL BUILDING PROJECTS
IN DUBAI
TAMADHUR H. F. AL JANABI
A thesis submitted in fulfilment of the
requirements for the award of the degree of
Doctor of Philosophy (Civil Engineering)
Faculty of Civil Engineering
Universiti Teknologi Malaysia
APRIL 2018
DEDICATION
Dedicated to
My Parents, Husband and my Children
ACKNOWLEDGEMENT
First and foremost, I would like to express my thanks to Almighty ALLAH
on the successful completion of this research work.
I also express my sincere and profound gratitude to my supervisor Professor
Dr. Muhd Zaimi Abd Majid for his continuous assistance, support, guidance, and
understanding throughout my graduate studies. His trust, patience, knowledge, great
insight, modesty and friendly personality have always been an inspiration for me and
will deeply influence my career and future life.
I am also grateful to the Faculty of Civil Engineering; UTM for support,
assistance and friendly treatment that did not only facilitated the work, but also made
it pleasant. Furthermore, I am thankful to all the contracting companies in Dubai for
the support provided to carry out the work.
Moreover, I wish to express my deep gratitude to my friends in Malaysia and
Dubai for their invaluable support and encouragement through the years. Likewise,
my heartiest appreciation and special thanks to my parents, husband and children for
their endless patience and understanding.
ABSTRACT
Many construction firms face hardships during the economic crisis due to
inaccurate bidding and difficulty in obtaining new projects because of cost
fluctuation. The best option for construction firms during an economic crisis is to
control their construction bid costs that fit the situation. The bidding cost during the
economic crisis has led to losses in the execution of projects. The study investigated
how the construction sector of Dubai, United Arab Emirate, experienced poor
bidding performance during the economic crisis. This is evident when material cost
was fluctuating and the construction companies had a tough time getting new
projects due to inaccurate bidding. This research looked into the details of
construction bidding management during the bidding stage by developing a
construction bid mathematical model to assist construction firms avoid bidding
problems during the economic crisis. Using the data gathered from the year 2009 and
2010 economic crash, a construction bid mathematical model and bidding plan
methodology were developed to better prepare construction companies during
economic crisis. The chronology of this study was divided into two phases. Phase
one involved conducting an extensive literature review and collecting secondary data.
Phase two focused on primary data gathering and analysis of the data collected.
Documentary analysis and questionnaire surveys were engaged as a source and tool
to gather the data. Data were analyzed using coefficient of variation and severity
index. From the available data, the bid mathematical model for bidding was
successfully developed. Then, ten experts validated this model and the data were
analyzed whereby the results showed that the model has successfully reduced the
estimation inaccuracy as well as predicted the problem faced especially bidding
during the economic crisis. The findings have shown that it is very important to have
a crisis-response plan in place to eradicate risks, secure the market and provide
solutions to problems faced during the crisis. In conclusion, the model can be used to
minimize the adverse effects on the construction companies, including the projects
and stakeholders in the construction industry.
ABSTRAK
Kebanyakan firma pembinaan mengalami kesusahan semasa krisis
ekonomi disebabkan oleh bidaan yang tidak tepat dan kesukaran untuk mendapatkan
projek baharu kerana kos yang tidak stabil. Pilihan terbaik untuk firma pembinaan
semasa krisis ekonomi adalah untuk mengawal kos bida pembinaan yang sesuai
dengan keadaan. Kos bidaan semasa krisis ekonomi menyebabkan kerugian dalam
pelaksanaan projek. Kajian ini mengkaji bagaimana sektor pembinaan di Dubai,
United Arab Emirate, mengalami prestasi bidaan yang lemah semasa krisis ekonomi.
Ini terbukti apabila kos bahan turun naik dan syarikat-syarikat pembinaan mengalami
kesukaran untuk mendapatkan projek baharu disebabkan oleh bidaan yang kurang
tepat. Kajian ini meneliti butiran pengurusan bidaan pembinaan semasa peringkat
pembidaan dengan membangunkan model matematik bida pembinaan untuk
membantu firma pembinaan mengelakkan masalah pembidaan semasa krisis
ekonomi. Dengan menggunakan data yang dikumpulkan daripada kemerosotan
ekonomi pada tahun 2009 dan 2010, model matematik bida pembinaan dan
metodologi pelan bidaan telah dibangunkan sebagai persediaan kepada syarikatsyarikat pembinaan semasa krisis ekonomi. Kronologi kajian ini dibahagikan kepada
dua fasa. Fasa pertama melibatkan kajian literatur yang luas dan mengumpulkan data
sekunder. Fasa kedua memberi tumpuan kepada pengumpulan data primer dan
analisis data yang telah dikumpul. Kajian dokumentari dan tinjauan soal selidik
digunakan sebagai sumber dan alat untuk mengumpulkan data. Data dianalisis
menggunakan pekali variasi dan severity index. Daripada data yang ada, model
matematik bida untuk bidaan berjaya dibangunkan. Sepuluh orang pakar
mengesahkan model ini dan data yang dianalisis menunjukkan bahawa model
tersebut berjaya mengurangkan ketidaktepatan anggaran serta meramalkan masalah
yang dihadapi terutamanya dalam pembidaan semasa krisis ekonomi. Dapatan kajian
menunjukkan bahawa pelan krisis-tindakan sangat penting untuk membasmi risiko,
mendapatkan pasaran dan menyediakan penyelesaian kepada masalah yang dihadapi
semasa krisis. Kesimpulannya, model ini boleh digunakan untuk meminimumkan
kesan buruk ke atas syarikat-syarikat pembinaan, termasuk projek-projek dan
pemegang taruh dalam industri pembinaan.
TABLE OF CONTENTS
CHAPTER
1
2
TITLE
PAGE
DECLARATION
i
DEDICATION
ii
ACKNOWLEDGEMENT
iii
ABSTRACT
iv
ABSTRAK
v
TABLE OF CONTENTS
vi
LIST OF TABLES
xiii
LIST OF FIGURES
xvii
LIST OF ABBREVIATIONS
xx
LIST OF APPENDICES
xxi
INTRODUCTION
1
1.1
Background of the Research
1
1.2
Problem Statements
3
1.3
Research Questions
5
1.4
Aim and Objective
5
1.5
Scope of the Research
6
1.6
Research Methodology
6
1.7
Significance of the Research
8
1.8
Thesis Organization
8
LITERATURE REVIEW
10
2.1
Introduction
10
2.2
Economic Crisis
11
2.3
Previous Works on Cost Bid
16
2.4
Construction Cost Biding
17
2.5
Residential Bidding Projects Competition in Dubai
20
2.6
Building Cost process for Construction Projects
21
2.7
Consultant and the Construction Firms
24
2.7.1 Construction Firm
24
2.7.2 Consultant
25
2.8
Factors Influencing the Success of Tender Bidding
26
2.9
Residential Building Bidding Plan
27
2.10
Problems of Construction Bidding Cost During the
Economic Economic Crisise
28
2.11
Bidding Cost Risk
32
2.12
Construction bidding Cost Risk During the
Economic Crises
34
2.13
Dubai’s Construction Economic Crises
37
2.14
Bidding Cost for Residential Building
39
2.15
Bidding Cost for Residential Building During Crisis
40
2.16
Factors Influencing Bidding Cost for Residential
Building During Crisis
41
2.16.1 Project Characteristics
42
2.16.2 Contractor Characteristics
43
2.16.3 Tendering condition, Consultant and Design
Characerisitics
2.17
2.16.4 External Factors and Market Conditions
45
2.16.5 Inaccuracy of Cost Estimation
45
Construction Bidding Cost High Level Component
(Bill of Quantities Cost Item)
2.18
44
47
Construction Bidding Cost Low Level Components
Unit Cost
50
2.18.1 Direct Cost
52
2.18.2 Material Cost
52
2.18.3 Labour Cost
54
2.18.4 Equipment Costs
56
2.18.5 Subcontractor Works
57
2.19
2.20
2.18.6 O verhead Cost
58
2.18.7 M ark Up
59
2.18.8 Profit
60
Construction Bidding Cost Component During
Economic Crisis
60
Construction Bidding Cost Strategy and Objectives
62
2.20.1 Cost-based Bidding Cost Strategy
63
2.20.2 Market-based Bidding Cost Policy
63
2.20.3 Standard Rate Table Based Bidding Cost
Strategy
2.20.4 Historical Based Price Bidding Cost Strategy
63
63
2.20.5 Subcontractors’ Bids based Bidding Cost
Strategy
3
64
2.20.6 Cover Price
64
2.21
Importance of Bidding Cost Strategy
65
2.22
Construction Bidding Cost Techniques
66
2.23
Construction Bidding Cost Methods
68
2.23.1 Conference Estimate
68
2.23.2 Financial Method
69
2.23.3 Superficial Area Method
69
2.23.4 The Cube Mthod
70
2.23.5 Single Price Rate Method
70
2.23.6 Aproximate Quantities
71
2.23.7 Element Estimating (Work Item Estimating)
71
2.24
Accuracy of Bidding Cost Method
72
2.25
Factors Affecting the Accuracy of Construction
Bidding Cost
75
2.26
Construction Bid Cost Model
77
2.27
Summary
85
METHODOLOGY
88
3.1
Introduction
88
3.2
Research Philosophy
88
3.2.1 Epistemology
89
3.2.1.1 Positivism
89
3.2.1.2 Interpretivism
90
3.2.2 Ontological Consideration
90
3.2.2.1 Realist Position
91
3.2.2.2 Relativist Position
91
3.2.3 Cignition and Neuroscience
92
3.2.4 Philosophical Stance of Research
93
3.3
Research Approach
94
3.4
Research Design
96
3.5
Method
97
3.6
Data Collection
101
3.6.1 Documentary Analysis
101
3.7
3.8
3.6.1.1 Documentary Analysis Grouping
103
3.6.1.2 Data Analysis
105
Methodology of the Survey
106
3.7.1 Area of the Research
106
3.7.2 Survey Within Documentary Analysis
106
3.7.3 Sampling Method of Data Collection
106
3.7.4 Data Collection (Documentary Analysis)
107
Survey
107
3.8.1 Questinnaire Survey
108
3.8.2 Quesionnaire Survey Phase 2
111
3.8.2.1 On Questionnaire Phase 1 and 2
(Data analysis)
112
3.8.3 Measuring Respondents’ Level of Agreement
3.9
for Questionnaire Phase 2
113
3.8.4 Sampling of Respondents
114
Construction Bid Cost Mathematical Model
114
3.9.1 Model Design
115
3.9.2 Testing and Validation of the Model
116
3.9.2.1 Confidentiality
116
3.9.2.2 Reliability
116
3.9.2.3 Validity
116
3.9.2.4 Model Testing
4
117
3.10
Construction Bidding Component
121
3.11
Mathematical Model Development Methods
122
3.12
Summary
122
RESULTS AND DISCUSSION
123
4.1
Introduction
123
4.2
Documentary Data for Residential Building Projects
in Dubai
4.3
Documentary Analysis Group A for Construction
Bidding Cost During the Economic Crisis
4.4
123
135
Documentary Analysis Group B for Bidding Cost
Component during the Economic Crisis With
Respect to Item of Project Prices
139
4.4.1 Preliminaries
139
4.4.2 Site Work
142
4.4.3 Concrete Work
145
4.4.4 Masonry Work
148
4.4.5 Thermal and Moisture Protection Work
150
4.4.6 Masonry Works and Thermal and Misture
Protection Work
4.5
152
4.4.7 Door and Windows
153
4.4.8 Metal Works
156
4.4.9 Carpentary Work
158
4.4.10 Metal Works and Carpentry Works
160
4.4.11 Finishes
160
4.4.12 Mechanical/Electrical and Plumbing Works
163
4.4.13 Conveying System
166
4.4.14 Accessories
169
4.4.15 External Works
171
4.4.16 Provisional Sum
173
Factors Influencing Bidding Cost of Residential
Building During Economic Crisis.
176
4.5.1 Project Characteristics
178
4.5.2 Client Characteristics
179
4.5.3 Contractor Characteristics
180
4.5.4 Bidding Conditions for Consultants and
Design
4.6
181
4.5.5 External Factors and Market Condition
182
4.5.6 Inaccuracy in Cost Estimations
182
Construction Bidding Plan for Cost Component
During the Economic Crisis
183
4.6.1 Main Construction Bidding Cost
Components During the Economic Crisis
4.7
5
183
4.6.2 Construction Bidding Plan
184
Summary
187
DEVELOPMENT OF CONSTRUCTION BID MODEL
188
5.1
Introduction
188
5.2
Model Design
190
5.2.1 Item Price Constraint
190
5.2.2 Maximum and Minimum PriceItem
Constraints
192
5.2.3 Maximum and Minimum Price Item
Percentage Constraint
194
5.2.4 Maximum and Minimum Price Rate
Constraint
197
5.3
Tender Price Constraint
199
5.4
Selection of Variables
201
5.5
Construction Bid Mathematical Model Development
202
5.5.1 Regression Model of the Collected Data
202
5.5.2 Item Wise Regression Modeling
203
5.5.3
206
5.6
Item Percentage Wise Regression Modelling
Questionnaire Regression Modelling
209
5.6.1
210
Variable Regression Modelling
5.7
5.8
5.9
5.10
6
Re-estimation of the Crisis Budding Project Using
the Model
213
Testing of Model Validly and Evaluation
216
5.8.1 Evaluation of Model by Expert
216
5.8.2 Model Accuracy
217
Construction Bid Cost Mathematical Model Benefits
to the Construction Firms
219
Summary
220
CONCLUSIONS AND RECOMMENDATIONS
222
6.1
Introduction
222
6.2
Conclusions
221
6.2.1 Identification and Establishment of Factors
that Influence Bidding Cost for Residential
Buildings During Economic Crisis.
224
6.2.2 Establishment of the Components of Bid
Model Necessary to be Considered in
Bidding Cost Model During the Economic
Crisis
224
6.2.3 Development of Construction Bid
Mathematical Model of a Residential
Building Project in Dubai During the
Economic Crisis
225
6.2.4 Validation of the Model Using Statistics and
Experts Oponion
227
6.3
Contribution of the Research
227
6.4
Limitation of the Research
229
6.5
Recommendation for Future Research
230
REFERENCES
Appendices A - D
232
267 – 294
LIST OF TABLES
TABLE NO.
TITLE
PAGE
2.1
Bidding Cost Problems during the economic crisis
30
2.2
Factors influencing the residential buildings’ bidding
cost
46
2.3
Classification of construction labor source
55
2.4
Comparison of Costs
59
2.5
Methods of Construction Bidding Cost
73
2.6
Factors
affecting
construction
bidding
cost
for
residential building project
2.7
76
The details of the mathematical model for the
construction bid cost
83
3.1
Summary of philosophical considerations
92
3.2
Strengths and weaknesses of mixed methods research
97
3.3
Design of questionnaire phase 1
110
3.4
Design of questionnaire phase 2
112
3.5
The respondent sampling
114
4.1
Project A
124
4.2
Project B
125
4.3
Project C
126
4.4
Project D
127
4.5
Project E
128
4.6
Project F
129
4.7:
Project G
130
4.8
Project H
131
4.9
Project I
132
4.10
Project J
133
4.11:
Project K
134
4.12
Project L
135
4.13
Dubai Construction Bidding Cost Analysis
136
4.14
Preliminaries bidding cost analysis
140
4.15
Site work bidding cost analysis
143
4.16
Concrete works bidding cost analysis
146
4.17
Masonry bidding cost analysis
148
4.18
Thermal and Moisture Protection bidding cost analysis
150
4.19
Doors and windows bidding cost analysis
154
4.20
Metal Works bidding cost analysis
156
4.21
Carpentry work bidding cost analysis
158
4.22
Finishes bidding cost analysis
161
4.23
MEP bidding cost analysis
164
4.24
Conveying System bidding cost analysis
167
4.25
Accessories bidding cost analysis
169
4.2
External works bidding cost analysis
171
4.27
Provision sums bidding cost analysis
174
4.28
Residential buildings influence cost factors
176
4.29
Residential buildings cost factor related to project
characteristics
178
4.30
Cost factors relating to client characteristics
179
4.31
Cost factors relating to contractor characteristics
181
4.32
Cost factors relating to tendering situations, consultants
and design
181
4.3
Cost factors external environment and market conditions
182
4.34
Cost factors associated with cost estimating inaccuracies.
183
4.35
Questionnaire Survey 1 Analysis
184
5.1
Regression Modeling for Preliminaries
203
5.2:
Site Work Regression Modeling
203
5.3
Concerete Work Regression Modelling
203
5.4
Masonry Work Regression Modelling
204
5.5
Thermal and Moisture Protection Regression Modelling
204
5.6
Doors and Windors Regression Modelling
204
5.7
Metal Work Regression Modeling
205
5.8
Carpentry Work Regression Modelling
205
5.9
Finishes Work Regression Modelling
205
5.10
MEP Work Regression Modelling
205
5.1
Conveying System Regression Modelling
206
5.12
Regression Modelling for Preliminary Percentage.
206
5.13
Site Work Percentage Regression Modelling
206
5.14
Concrete Work Percentage Regression Modelling
207
5.15
Masonry Work Percentage Modelling
207
5.16
Thermal and Moisture Protection Percentage Modelling
207
5.17
Door and Windows Percentage Regression Modelling
208
5.18
Metal Work Percentage Regression Modelling
208
5.19
Carpentry Work Percentage Regression Modelling
208
5.20
Finishes Work Percentage Regression Modelling
208
.21
MEP Work Percentage Regression Modelling
209
5.22
Conveying System Percentage Regression Modelling
209
5.23
Project Total Price Regression Modelling
209
5.24
Calculation for independent variable (A1and A1% to A6
and A6%) for each project
5.2
Calculation for average independent variables (A1and
A1% to A4 and A4%)
5.26
212
Calculation for the average of independent variables (A9
and A9% to A11 and A11%)
5.29
212
Calculation for the average of independent variables (A5
and A5% to A8 and A8%)
5.28
211
Calculation for independent variables (A1and A1% to A4
and A4%)
5.27
211
213
Projects maximum and minimum limits of the project
ltem cost price per square foot for 2009 and 2010
analysis before and after substiting the independent
cariables
5.30
214
Projects item maximum and minimum percentages price
per square foot
215
5.31
5.32
Correlation coefficient calculation for model inputs and
outptputs
217
Correlation coefficentfor the model inputs and outputs
218
LIST OF FIGURES
FIGURE NO.
TITLE
PAGE
1.1
Research Methodology.
7
2.1
Value of GCC Contracts Awarded, 2007 – 2013.
12
2.2
Construction Bid process.
23
2.3
Tender Cost Index from 2008-2015.
38
2.4
Theoretical Frame Work.
40
2.5
A model of residential buildings’ bidding cost influential
factors.
43
2.6
Cost Elements sources.
51
3.1
Research Methodology Flow Chart
100
3.2
Summary of Documentary analysis Flow
102
3.3
Questionnaires Phase 1 Flow Chart Process
109
4.1
Dubai Building Bidding Cost per square foot in 2009
and 2010
4.2
Percentage of Preliminaries of total bidding cost in 2009
and 2010
4.3
141
Preliminaries bidding cost per square foot in 2009 and
2010
4.4
137
141
Percentage of Site work of total bidding cost in 2009 and
2010
144
4.5
Site work bidding cost per square foot in 2009 and 2010.
144
4.6
Percentage of concrete work of total bidding cost in
2009 and 2010
4.7
4.8
146
Concrete work bidding cost per square foot in 2009 and
2010
147
Masonry work of total bidding cost in 2009 and 2010
149
4.9
Masonry work bidding cost per square foot in 2009 and
2010.
4.10
Percentage of thermal and moisture protection of total
bidding cost in 2009 and 2010
4.11:
165
Percentage of conveying system of total bidding cost in
2009 and 2010
4.23
164
MEP work bidding cost per square foot in 2009 and
2010.
4.22
162
Percentage of MEP of total bidding cost in 2009 and
2010
4.21
160
Finishes work bidding cost per square foot in 2009 and
2010
4.20
159
Percentage of Finishes work of total bidding cost in
2009 and 2010
4.19
159
Carpentry work bidding cost per square foot in 2009 and
2010.
4.18
157
Percentage of carpentry work of total bidding cost in
2009 and 2010
4.17
157
Metal works bidding cost per square foot in 2009 and
2010.
4.16
155
Percentage of metal works of total bidding cost in 2009
and 2010
4.15
154
Doors and windows bidding cost per square foot in 2009
and 2010
4.14
151
Percentage of doors and windows of total bidding cost in
2009 and 2010
4.13
151
Thermal and moisture protection bidding cost per square
foot in 2009 and 2010.
4.12
149
167
Conveying system bidding cost per square foot in 2009
and 2010
168
4.24
Accessories of total bidding cost in 2009 and 2010
170
4.25
Accessories work bidding cost per square foot in 2009
4.26
and 2010
170
External works of total bidding cost in 2009 and 2010
172
4.27
External works bidding cost per square foot in 2009 and
2010
4.28
Percentage of provisional sum of total bidding cost in
2009 and 2010
4.29
172
174
Provision sum bidding cost per square foot in 2009 and
2010.
175
LIST OF ABBREVIATIONS
AACE
-
American Association of Cost Engineers
AED
-
United Arab Emirate Dirham
AASE
-
Airborne Arctic Stratospheric Expeditions
BCR
-
Beyond Contractual Reward
BIM
-
Building Information Modelling
BQ
-
Bill of Quantities
CIOB
-
Chartered Institute of Buildings
COV
-
Coefficient of Variation
DCAM
-
Division of Capital Asset Management
GCC
-
Gulf Corporation Council
GFA
-
Gross Floor Area
GSA
-
General Service Administration
ICE
-
Institute of Civil Engineers
IBS
-
Industrialized Building System
MEED
-
Middle East Economic Digest
MEP
-
Mechanical Electrical and Plumbing
MTD
-
Maintenance Training Device
PC
-
Prime Cost
PRI
-
Profitability Requirement Index
PRIR
-
Profitability Responsiveness Item Ranking
RD
-
Repair and Alteration
RICS
-
Royal Institute of Chartered Surveyors
SF
-
Square Foot
SMM
-
Standard Method of Measurement
WSDOT
-
Washington Department of Transportation
UAE
-
United Arab Emirate
LIST OF APPENDICES
APPENDIX
TITLE
A
Statistics on Trends of Material Prices
B
BQs Items Details and Residential building
PAGE
275
projects tender documents collected date check list
276
C
Construction Companies Questionnaires Survey
Phase 1
295
D
Construction Companies Questionnaires Survey
Phase 2
357
E
Construction Companies Evaluation Letters
383
CHAPTER 1
1INTRODUCTION
1.1
Background of the Research
Construction bidding cost for residential building projects in Dubai during
economic crisis will be analyzed to determine the construction bid mathematical
model for the year 2009 and 2010. This period was chosen to reflect the latest
economic crisis of Dubai and show the difficulties of bid winning of residential
building projects (MEED, Middle East Economic Digest Cost Indices Report, 2012).
The bases of developing the bidding mathematical model which is a unique
contribution for this study and will be a reference for the construction companies
during the economic crisis (Jung et al, 2016).
Instead of preparing precise basic reasons for fluctuations in price,
forecasting bid levels was given more emphasis. And the achievement or
disappointment of a project can be judged based upon various factors yet the most
well-known factor is the cost. The most vital component to a client is ordinarily to
finish the project within budget (Wood, 2010).
Many unsuccessful businesses were the result of more and more
inexperienced people forming construction firms and venturing into the construction
sector each year, as free exit naturally follows free entry. The construction sector’s
unpredictability including high risks further added to this situation. According to
Kaka (1990), the high risks include elements of weather, site problems as well as the
2
need to price building materials before they were manufactured in the old way of
tender bidding.
It is obvious that difficulties of winning new bid of residential building
existed in Dubai during the economic crisis in 2009 and 2010. According to Gugler
et al, (2015), these difficulties were due to the wrong cost estimation. Likewise,
Mansfield et al. (1994) asserted that wrong cost estimation was due to construction
market fluctuation (The tender stage for Dubai’s residential buildings during the
economic crisis is very crucial and important and the estimations done in these stages
must be accurate and precise).
The wrong cost estimation and the difficulties of getting new residential
building projects were faced by the United Arab Emirates (UAE) construction firms
in 2009. In addition, the construction market was suffering the effects of an
economic liquidity crunch and that was evident in the impact on tender prices
(MEED, 2012).
Therefore, competing among contractors in the construction industry,
increased which resulted high rate of residential building projects bid failure and the
construction market instability. Many attempts to identify and solve the problem of
construction bidding failure in residential building projects in the construction
industry during the economic crisis were in conflict. The construction bidding cost
has attracted a lot of attention in the recent years. However, more efforts are required
to achieve a successful bidding especially during the economic crisis.
To obtain an exact estimate for residential building projects in Dubai during
economic crisis is very critical. While it is not easy to prepare the budget forecast as
it involves predicting the nature of residential building project, on the other hand,
lack of cost forecasting for residential building projects was the main cause for the
failure of construction firms in Dubai during economic crisis (Challal and Tkiouat,
2012). To be able to conduct cost forecasts on a frequent basis, the method used has
to be simple, fast and reliable. Current construction bid models for residential
3
building projects have not considered bid evaluation stage during economic crisis.
Consequently, cannot be used for residential building during economic crisis
(Apeldoorn, 2013; Pucker et al., 2006).
Moreover, all residential building projects are known to have some form of
risk due to market fluctuation especially during economic crisis. Most Dubai
contractors did not adopt construction bid model for residential building projects
during economic crisis. According to Latham (1994), risk of market fluctuation in
the construction sector must be anticipated and handled well, reduced as much as
possible, either solved together or relocated. In this regard, construction bid must be
managed according in Dubai peculiarity taking into account construction market
fluctuation during this economic crisis 2009 and 2010 (Myers, 2017). This research
effort is made to introduce approaches for predicting construction bid model
associated with residential building projects.
1.2
Problem Statements
It is obvious that the residential building project during economic crisis can
never be considered successful if the cost, upper and lower limits are applied to it are
not satisfied (Elchaig et al, 2005). And most common causes of residential buildings
failure in construction industry during economic crisis were low profits and
inadequate market risk (Kanggari, 1988). Large construction companies in Dubai
failed to dominate a respectable share of the market. To this effect, accurate market
price fluctuation information, feedback of building materials, equipment and
technologies during residential building projects necessary to allocate the required
risk factor for this residential building bid during economic crisis is questionable.
Consequently, these companies are always characterized by fluctuations and crisis
effect.
Also due to global economic crisis, the impact on tender prices after the real
estate crash was reflected on the commodities, costs for thirty two (32) key items.
4
These include cost of materials, labor, plant and fuel. Likewise, it involves the price
movements for major items, such as concrete in foundations, reinforcement steel and
formwork to slabs and soffits. Tender prices is not just the material cost, but also the
cost of transporting and placing the materials, it has tracked commodity items using
this compounded rate as used in tender information (MEED Cost Indices Report,
2012).
Most construction companies faced bidding cost issues due to the wrong
estimation of cost especially during the economic crises period. The wrong
estimation of cost is commonly found in the tender and bidding stages
(www.dubaided.gov.ae). The tender stage is very crucial and the estimations done
on these stages must be accurate in Dubai especially during economic crisis. If the
contract sum was wrongly estimated, then the construction company will lose this
job. This is not good for the company in terms of its image, reputation, loyalty and
good market rating (Sriprasert, 2000).
Currently, conventional bidding cost model could not adequately fulfill the
needs of construction sector needs, since most of the conventional models did not
incorporate the market fluctuation uncertainties in such a challenging environment,
residential building projects must integrate market fluctuations (Abdallah, 2007).
In Dubai, the shift towards construction bid cost was driven by two major
reasons. Firstly, the need to estimate bid projects and secondly,
the need for
construction companies’ innovation in the bidding cost model of residential building
projects. In developing countries like UAE, the high demand for residential buildings
pressures on global market situation and competition compelled construction
companies to innovate alternative bidding models to improve estimation for
residential building projects (Al Sharif, 2007).
Construction markets are complex and require careful segmental bid models.
The construction industry has undergone considerable model change in the last
decade. Clients that are ever demanding and fierce competitions have resulted in
5
many construction companies having to look for ways of: beating their competitors.
They focused on new bidding models, getting to know market situation of residential
building projects, doing their marketing before trying to participating in their bids
(Christopher et al., 2003). Hence, this study focused on the Dubai’s economic crisis
in 2009-2010 to answer several questions arised
1.3
Research Questions
1. Do construction firms face bidding problems in residential building projects
in Dubai during economic crisis (2009-2010)?
2. Do construction bid factors of residential building projects arise during
market fluctuation?
3. Has there been any construction bid model to achieve appropriate estimation
for residential building projects during the economic crisis?
4. Is there any construction bid risks that arise for residential building projects
during economic crisis?
1.4
Aim and Objective
The aim of this study is to develop a construction bid cost mathematical
model during economic crisis for residential buildings in Dubai, United Arab
Emirates. To achieve this aim, the following objectives are identified:
i.
To identify and establish the factors that influence bidding cost for residential
buildings during economic crisis.
ii.
To establish the components of bid model necessary to be considered in
bidding cost model during economic crisis.
iii.
To develop the construction bid mathematical model of a residential building
project in Dubai during economic crisis.
iv.
To validate the bid model statistically through expert opinions.
6
1.5
Scope of the Research
This research focused on build construction bid model for residential building
projects in Dubai during economic crisis. The research made used of typical bidding
documents for Dubai’s residential building projects for the year 2009 and 2010. The
first questionnaire was developed to establish the required cost mathematical model
and construction bidding cost components. The second questionnaire on the other
hand focused on establishing the main components affecting residential building
projects bidding. It also deals with the main variables in developing the bid
mathematical model. Furthermore, the type of the projects considered are residential
buildings. To this effect, the bidding stage for project executed duration for
economic crisis was the main focus. On the other hand, the documentary analysis
was performed to get an insight on the real market fluctuation and to explore the
factors and components affecting bidding cost during economic crisis to establish the
construction bid mathematical model and contractors’ bid plan
1.6
Research Methodology
The research is divided into four phase 1, 2, 3 and four respectively, as
illustrated in the Figure 1.1. Phase 1 deal with the identification of research problems
and establishing the aims and the objectives of the research.
Phase 2 covers a review on the information regarding the problem,
construction-bidding cost during economic crisis in Dubai; factors influencing
residential building bidding cost during economic crisis, construction bidding cost
components during economic crisis and existing construction bidding cost models.
Phase 3 deals with the , documentary analysis to investigate the bidding cost
of construction for residential buildings during the economic crisis from 2009 to
2010. Likewise, Phase 3 involved questionnaire surveys to support the documentary
7
analysis in order to determine the construction bidding cost problems for residential
buildings during the economic crisis in Dubai,
Phase 4 covers development of construction cost bid mathmatical model,
bidding paln and validation of the model.
Figure 1.1: Research Methodology
8
1.7
Significance of the Research
The reaearch identifies and established those factors influencing bidding cost
for residential buildings during the economic crises. Likewise, construction bid
mathematical model for residential building projects that incorporate construction
market fluctuations and accurately predicts the biddig cost during the economic
crises is developed. The model can be used by relevant firms for predicting the
demand of ideal cost estimate of residential building projects for biding stage during
economic crisis. Consequently, this will assist construction firms to survive the most
competative environment during the economic crises with increased level of
satisfaction.
1.8
Thesis Organization
This thesis is divide into six chapters. Chapter 1 which consists of
background of the research, problem statement, objectives of the research, scopes of
the research, and significant of the research aimed to highlight the introduction
aspect of this research work.
Chapter 2 consists of comprehensive literature review based on the research
topic. The literature reviewed covers the general overviews on factors affecting
construction bidding cost. The chapter further reviews the available construction
biiding cost methods It also describes the overview of construction bid cost
mathemamtical models.
Chapter 3 explained the methodology, data collection and analysis
conducted to achieve the research objectives. The chapter discussed the research
approach and overall research flow chart.
Chapter 4 describes the results for the data collected from documentary
analysis, questionnaire phase 1 and questionnaire phase 2. It also discusses the
9
results of projects’ prices during the economic crisis, construction bidding cost item
components for data collected from the documentary analysis, the results for the
residential building projects bidding cost in the form of graphs and tables, the
construction bidding methodologies of bidding cost and the construction bidding cost
components during the economic crisis.
Chapter 5 presents the final results of the study, the construction bid cost
mathematical model for residential buildings including validation tests for the model
and then establish the contractors’ construction bidding plan as well as cost
components.
Chapter 6. Finally, overall conclusions were made based on the objectives.
Recommendations for further investigation based on the research outcome
acknowledge during this study were mentioned and highlighted
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