How contractors price risk in bids: theory and practice

Formal and analytical models that contractors can use to assess and price project risk at the tender stage have proliferated in recent years. However, they are rarely used in practice. Introducing more models would, therefore, not necessarily help. A better understanding is needed of how contractors arrive at a bid price in practice, and how, and in what circumstances, risk apportionment actually influences pricing levels. More than 60 proposed risk models for contractors that are published in journals were examined and classified. Then exploratory interviews with five UK contractors and documentary analyses on how contractors price work generally and risk specifically were carried out to help in comparing the propositions from the literature to what contractors actually do. No comprehensive literature on the real bidding processes used in practice was found, and there is no evidence that pricing is systematic. Hence, systematic risk and pricing models for contractors may have no justifiable basis. Contractors process their bids through certain tendering gateways. They acknowledge the risk that they should price. However, the final settlement depends on a set of complex, micro-economic factors. Hence, risk accountability may be smaller than its true cost to the contractor. Risk apportionment occurs at three stages of the whole bid-pricing process. However, analytical approaches tend not to incorporate this, although they could.

Construction management contracts: law and practice

The context of construction management (CM) reveals that this method of procurement is as much a management philosophy as a contract structure. It is important to consider legal and contractual issues in this context. The interplay between management and law is complex and often misunderstood. Before considering specific issues, the use of contractual remedies in business agreements is discussed. In addition, the extent to which standardising a form of contract detracts or contributes to the success of projects is also considered. The dearth of judicial decisions, and the lack of a standard form, render it difficult to be specific about legal issues. Therefore, the main discussion of legal issues is centred around a recently completed research project which involved eliciting the views of a cross-section of experienced construction management clients, consultants and trade contractors. These interviews are used as the basis for highlighting some of the most important legal points to consider when setting up CM projects. The interviews revealed that the advantage of CM is the proximity of the client to the trade contractors and the disadvantage is that it depends on a high degree of professionalism and experience; qualities which are unfortunately difficult to find in the UK construction industry.

Theory and practice in value management: a reply to Ellis et al (2005)

The constructivist model of 'soft' value management (VM) is contrasted with the VM discourse appropriated by cost consultants who operate from within UK quantity surveying (QS) practices. The enactment of VM by cost consultants is shaped by the institutional context within which they operate and is not necessarily representative of VM practice per se. Opportunities to perform VM during the formative stages of design are further constrained by the positivistic rhetoric that such practitioners use to conceptualize and promote their services. The complex interplay between VM theory and practice is highlighted and analysed from a non-deterministic perspective. Codified models of 'best practice' are seen to be socially constructed and legitimized through human interaction in the context of interorganizational networks. Published methodologies are seen to inform practice in only a loose and indirect manner, with extensive scope for localized improvization. New insights into the relationship between VM theory and practice are derived from the dramaturgical metaphor. The social reality of VM is seen to be constituted through scripts and performances, both of which are continuously contested across organizational arenas. It is concluded that VM defies universal definition and is conceptualized and enacted differently across different localized contexts.