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BidCompensationDecisionModelforProjects

withCostlyBidPreparation

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S.PingHo,A.M.ASCE

Abstract:Forprojectswithhighbidpreparationcost,itisoftensuggestedthattheownershouldconsiderpayingbidcompensationto

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dthemosthighlyrankedunsuccessfulbidderstostimulateextraeffortorinputsinbidpreparation.Whereastheunderlyingideaofusing

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ebidcompensationisintuitivelysound,thereisnotheoreticalbasisorempiricalevidenceforsuchsuggestion.Becausecostlybid

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rpreparationoftenimpliesalargerprojectscale,theissueofbidcompensationstrategyisimportanttopractitionersandaninterestofstudy.

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gThispaperaimstostudytheimpactsofbidcompensationandtodevelopappropriatebidcompensationstrategies.Gametheoryisapplied

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ltoanalyzethebehavioraldynamicsbetweencompetingbiddersandprojectowners.Abidcompensationmodelbasedongametheoretic

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yanalysisisdevelopedinthisstudy.Themodelprovidesequilibriumsolutionsunderbidcompensation,quantitativeformula,andquali-

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otativeimplicationsfortheformationofbidcompensationstrategies.

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aDOI:10.1061/(ASCE)0733-9364(2005)131:2(151)

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eCEDatabasesubjectheadings:Bids;Projectmanagement;Contracts;Decisionmaking;Design/build;Build/Operate/Transfer;

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oConstructionindustry

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tIntroductionhasaddressedtheselectionofprojectsthatareappropriatefor

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icertainproj