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.

Mathematical modelling of competitive LDL/VLDL binding and uptake by hepatocytes

Elevated levels of low-density-lipoprotein cholesterol (LDL-C) in the plasma are a well-established risk factor for the development of coronary heart disease. Plasma LDL-C levels are in part determined by the rate at which LDL particles are removed from the bloodstream by hepatic uptake. The uptake of LDL by mammalian liver cells occurs mainly via receptor-mediated endocytosis, a process which entails the binding of these particles to specific receptors in specialised areas of the cell surface, the subsequent internalization of the receptor-lipoprotein complex, and ultimately the degradation and release of the ingested lipoproteins' constituent parts. We formulate a mathematical model to study the binding and internalization (endocytosis) of LDL and VLDL particles by hepatocytes in culture. The system of ordinary differential equations, which includes a cholesterol-dependent pit production term representing feedback regulation of surface receptors in response to intracellular cholesterol levels, is analysed using numerical simulations and steady-state analysis. Our numerical results show good agreement with in vitro experimental data describing LDL uptake by cultured hepatocytes following delivery of a single bolus of lipoprotein. Our model is adapted in order to reflect the in vivo situation, in which lipoproteins are continuously delivered to the hepatocyte. In this case, our model suggests that the competition between the LDL and VLDL particles for binding to the pits on the cell surface affects the intracellular cholesterol concentration. In particular, we predict that when there is continuous delivery of low levels of lipoproteins to the cell surface, more VLDL than LDL occupies the pit, since VLDL are better competitors for receptor binding. VLDL have a cholesterol content comparable to LDL particles; however, due to the larger size of VLDL, one pit-bound VLDL particle blocks binding of several LDLs, and there is a resultant drop in the intracellular cholesterol level. When there is continuous delivery of lipoprotein at high levels to the hepatocytes, VLDL particles still out-compete LDL particles for receptor binding, and consequently more VLDL than LDL particles occupy the pit. Although the maximum intracellular cholesterol level is similar for high and low levels of lipoprotein delivery, the maximum is reached more rapidly when the lipoprotein delivery rates are high. The implications of these results for the design of in vitro experiments is discussed.

Selective separation of the major whey proteins using ion exchange membranes

Synthetic microporous membranes with functional groups covalently attached were used to selectively separate beta-lactoglobulin, BSA, and alpha-lactalbumin from rennet whey. The selectivity and membrane performance of strong (quaternary ammonium) and weak (diethylamine) ion-exchange membranes were studied using breakthrough curves, measurement of binding capacity, and protein composition of the elution fraction to determine the binding behavior of each membrane. When the weak and strong anion exchange membranes were saturated with whey, they were both selective primarily for beta-lactoglobulin with less than 1% of the eluate consisting of alpha-lactalbumin or BSA. The binding capacity of a pure alpha-lactoglobulin solution was in excess of 1.5 mg/cm(2) of membrane. This binding capacity was reduced to approximately 1.2 mg/cm(2) when using a rennet whey solution (pH 6.4). This reduction in protein binding capacity can be explained by both the competitive effects of other whey proteins and the effect of ions present in whey. Using binary solution breakthrough curves and rennet whey breakthrough curves, it was shown that alpha-lactalbumin and BSA were displaced from the strong and weak anion exchange membranes by beta-lactoglobulin. Finally, the effect of ionic strength on the binding capacity of individual proteins for each membrane was determined by comparing model protein solutions in milk permeate (pH 6.4) and a 10 mM sodium phosphate buffer (pH 6.4). Binding capacities of beta-lactoglobulin, alpha-lactalbumin, and BSA in milk permeate were reduced by as much as 50%. This reduction in capacity coupled with the low binding capacity of current ion exchange membranes are 2 serious considerations for selectively separating complex and concentrated protein solutions.

Deciding the price of fame

Previous studies of ignorance-driven decision-making have either analyzed when ignorance should prove advantageous on theoretical grounds, or else they have examined whether human behavior is consistent with an ignorance driven inference strategy (e.g., the recognition heuristic). The current study merges these research goals by examining whether – under conditions where ignorance driven inference might be expected – the type of advantages theoretical analyses predict are evident in human performance data. A single experiment shows that, when asked to make relative wealth judgments, participants reliably use recognition as a basis for their judgments. Their wealth judgments under these conditions are reliably more accurate when some of the target names are unknown than when participants recognize all the names (the “less-is-more effect”). these data are robust against a number of variations on the size of the pool from which participants have to choose and the nature of the wealth judgment.

The tendering process and performance analysis of a public building project in Ghana

A case study on the tendering process and cost/time performance of a public building project in Ghana is conducted. Competitive bids submitted by five contractors for the project, in which contractors were required to prepare their own quantities, were analyzed to compare differences in their pricing levels and risk/requirement perceptions. Queries sent to the consultants at the tender stage were also analyzed to identify the significant areas of concern to contractors in relation to the tender documentation. The five bidding prices were significantly different. The queries submitted for clarifications were significantly different, although a few were similar. Using a before-and-after experiment, the expected cost/time estimate at the start of the project was compared to the actual cost/time values, i.e. what happened in the actual construction phase. The analysis showed that the project exceeded its expected cost by 18% and its planned time by 210%. Variations and inadequate design were the major reasons. Following an exploration of these issues, an alternative tendering mechanism is recommended to clients. A shift away from the conventional approach of awarding work based on price, and serious consideration of alternative procurement routes can help clients in Ghana obtain better value for money on their projects.

The price of risk in construction projects: contingency approximation model (CAM)

Little attention has been focussed on a precise definition and evaluation mechanism for project management risk specifically related to contractors. When bidding, contractors traditionally price risks using unsystematic approaches. The high business failure rate our industry records may indicate that the current unsystematic mechanisms contractors use for building up contingencies may be inadequate. The reluctance of some contractors to include a price for risk in their tenders when bidding for work competitively may also not be a useful approach. Here, instead, we first define the meaning of contractor contingency, and then we develop a facile quantitative technique that contractors can use to estimate a price for project risk. This model will help contractors analyse their exposure to project risks; and help them express the risk in monetary terms for management action. When bidding for work, they can decide how to allocate contingencies strategically in a way that balances risk and reward.