Competition’s Effect On Construction Bid Quality

Full Description

The Federal Highway Administration (FHWA) mandates the use of a competitive procurement process for most State Department of Transportation projects that are funded through the Federal-Aid Highway Program. For those projects utilizing the traditional Design-Bid-Build (D-B-B) delivery method, FHWA policy stipulates that bids must be received from competing contractors who are solicited by openly advertising the terms and conditions of the contract. Recently the FHWA has accepted the use of Design-Build (D-B) as an alternative project delivery method. Under D-B a select group of contractors is solicited and then a small subgroup is “short listed” to provide sealed bids. In a 2006 study, the FHWA found that the average number of bidders under D-B was almost 40 percent less than for the traditional method. This study examines the effect that a similar reduction in the number of bidders had on the quality of bid results. The study found that as the number of bidders decreased from six to four, the number of unfavorable bids increased from 17.5 percent to 40.8 percent.