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Integrated Decision Support Model for Construction Project Tendering

1

Fadhilah Ahmad and 2M Yazid M Saman

Faculty of Informatics, University Sultan Zainal Abidin Malaysia (UniSZA), Gong Badak Campus, 21300 Kuala Terengganu, Malaysia.
2

Faculty of Science and Technology, Universiti Malaysia Terengganu(UMT), 21030 Mengabang Telipot, Kuala Terengganu, Malaysia.

Abstract. Tendering is an important issue that requires Decision Support System (DSS) attention as a decision to award tenders to certain competing applications could influence successful completion of a project. This paper presents a framework of DSS for a tendering process based on a combination of single criteria statistical model, weighted model and an extended AHP model known as Guided AHP (GAHP). This hybrid model allows single criteria tender prices which are considered abnormal to be excluded from further detail multi-criteria GAHP evaluation. GAHP is proposed to minimize the possibility of inconsistent data entry and to improve evaluation accuracy and flexibility. The use of model integration takes the advantage of their strengths and complements each others weaknesses. However, this paper focuses more on the statistical model. Finally, a real organizational government tendering application is applied to demonstrate the potential of the proposed framework. Keywords: Decision support system, Multi Criteria Decision Making, AHP, Statistical model

In this study, the integration of statistical, weighted and extended AHP known as Guided AHP framework is 1 INTRODUCTION developed for effective tender application evaluation and endering problems are one of the areas that require selection. The proposed research aims to investigate, design Decision Support System (DSS) attention as a decision to and implement an integrated model for tendering process award a tender to certain competing applications could implementableinawebbasedenvironment. influence successful completion of a project [1,2,3,4,5,6,7,8,9]. The main strength of the proposed approach is in the Much of the work done on tender evaluation is based on the integration of model bases, where they formally address both use of Multi Criteria Decision Making (MCDM) models. single criterion and multicriteria evaluation. In the single AnalyticHierarchyProcess(AHP)wasusedintheselectionof criterion, statistical model is adopted. To facilitate the multi the best discount in dealing with the tenders for public work criteria evaluation AHP model [14] is used because it is contract[10].DSSforawardingthetendertothelowestbidder suitabletobeadoptedwhenthereisafinitesetofattributesto using Delphi and AHP had also been developed [11]. be considered in the evaluation process [17,18,19,21,22,23]. Statistical models have been used in the tender evaluation for Firstly, the AHP model is experimented with to foresee any work contracts in Malaysian Government procurement. The possibledeficiencyorimpedimentbeforeitisimplementedin use of the statistical model in this case is to evaluate tender theselectedcasestudy. prices. Contractors perceptions of the statistical model had During the testing, it was found that the users have beeninvestigated[12].Theresultsofthestudyshowthatthe difficultiestoenterconsistentdataintothedecisionmatrix.In useofthismodelintenderevaluationprocessisagreedtoby order to reduce this problem, AHP is extended to become many contractors. However, the contractors have suggested GuidedAHP(GAHP). the need to consider the current market price criterion and The organization of this paper is as follows: Section 2 other tender related criteria in the evaluation process. The presents the fundamentals for the right approach of assertion imposed by the contractors in the study done by construction project tendering. The framework of the Faridah has some similarities with the previous study [13]. integrated models for the tendering process is described in Both of these studies emphasized the need for multi criteria Section 3. In Section 4 we present the empirical results of the factors(other nonpricefactors)to betakenintoconsideration proposed framework. Finally, the concluding remarks and a withthetenderpricefactorthatiscurrentlyevaluatedviathe proposedfuturedirectionaregiveninSection5. statisticalmodel.

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The second shortcoming is that, only price factor is evaluated through the system. Other criteria such as experience,capital,expertise,andstaffinglevelsareevaluated manually or sometimes rated equally. This is unfair to the Therewere64,895registeredcontractorsinMalaysiaattheend tenders that possess better experience, capital, expertise, and of 2010 (Construction Industry Development Board, CIDB, staffing levels compared to those that have just fair criteria Malaysia, 2010). This value includes 137 foreign contractors. value.Besidesthat,itisbelievedthatmanualevaluationmay Comparedtothesameperiodin2009,thenumberofregistered leadtoinaccuratedecisionsespeciallywhenitinvolvesalarge contractorsshowedaphenomenalincreaseof66.2%whichwas number of tenders. The benefits or value from procurement 42,960. In terms of the projects awarded to the contractors in should commensurate with the costs involved. Therefore, the 2009,itsvaluewasRM57.2billionandRM81.1billionin2008. selection of the most eligible contractor has to be thoroughly ThedemandsforconstructionfromthePublicsectoramounted evaluated, reasoned, and justified so that the tender is to RM28.4 billion and demand from the Private sector awarded to the contractor that offer the best value for money amountedtoRM28.8billionandcontributed50.0%tothetotal [30]. constructionworkvalueannually.Thesevaluesshowthatthe This paper addresses the above mentioned issues by Malaysian Construction Industry is a competitive industry. implementing the integrated model approach for DSS The key objective of the government is to select the most tendering using the statistical, weighted and enhanced AHP eligible contractor who can deliver the right project forwebbasedenvironment. performance;earlystartofconstructionwork,reasonablecost, and good quality product and within the specified time, minimalexposuretoriskandearlyconfirmationofdesignand 3 FRAMEWORK FOR INTEGRATED MODEL price or cost [26]. To achieve this target, the Ministry Of Finance(MOF),Malaysiahasbeengivenamandatetogovern The process flow for DSS tendering process is a fourphased procurement activities in Malaysia. The procurement is to process; prerequisite, Statistical, Weight and GAHP analysis. support government programs by obtaining value for money Eachphaseoftheprocesshastobeexecutedsequentially.This throughacquisitionofworks,supplies,andservices.Thereare workfocusesonStageIIonwardsasitrequiresthejudgments four types of public procurement in Malaysia: Tender, Open orintuitionsfromthedecisionmakers(DMs). Tender, quotations, and direct purchase [29]. This paper focuses on the procurement for works contract which is 3.1 Statistical Analysis tendering. Tendering is specifically for public procurement with a value above RM200,000.00 (Malaysian Government The second stage is statistical analysis which can be executed TreasuryAct).Tenderswouldbeinvitedfromcontractorsfora basedonthetenderprice.Allthepricesthatareconsideredin project approved by the Treasury Secretary General or the this stage are from the tender documents that have passed StateTreasurycommittee. through Stage I evaluation. The tender price is evaluated to Selecting the most eligible contractors for certain determine the freak prices (or Z scores) and cutoff price construction projects is very crucial [24,25,26,27] in order to (COP). ensuresuccessfulcompletionoftheprojectswithanacceptable Freak prices are the values that are considered either too quality level. The Malaysian government has been using e low or too high and they have to be rejected from further Procurementapplicationsince1999. Typically, eprocurement web sites allow qualified and analysis.The calculationforfreakpriceor Z scores, Z x for registered users to look for buyers or sellers of goods and eachtenderprice,isgivenas: services [28]. A web site by the Public Works Department enablesthecontractorstoaccessinformationaboutcurrentand X x Zx i (1) previoustendersoffered. x The department performs the tender evaluation process basedonthepriceandamultitudeofothercriteria.Asystem to evaluate the tender price based on the statistical model for IF 2.33 Z x 2.33 thenmarkthetenderasnonfreak (2)

TENDERING FOR CONSTRUCTION PROJECTS IN MALAYSIA

standalone computers had been developed using Microsoft Visual Basic [31]. The evaluation of other criteria is done manually. TherearetwoobviousshortcomingsoftheexistingTender Evaluation System. Firstly, the current system is standalone. Standalone computers have obvious problems such as being unable to be shared by many users at any given time, limited time and space boundary usage, and do not allow communicationamongDMs.

ThecalculationforStandarddeviation is:

( Xi ) N

(3)

Where,

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X i :Tenderprice(thathaspassedthroughStageIevaluation) :Averageofalltenderprices N :Numberoftenders(maximumnumberoftendersthatare

considered) ThecalculationforCoefficientofVariation, CV foralltender pricesisshownas:

3.2 Weighted Model Operations

Criteria weight could influence the final ranking order or contractors[3].WeightedmodelisconstructedtoenableaDM to assign numerical values to the criteria via the model interface. The criteria used for the construction tender evaluation include experience, technical staff, previous, and current project performance, financial aspects that include capital and liability, and the instrument possessed by the contractors. The criteria ranking analysis is performed by the DM to judge the relative importance of each criteria with respecttoallthecriteriausedintheevaluationprocess. ThestructureofthesecriteriaisdrawnbasedontheAHP principle,showninFig.1.

CV

(4)

COP is the lowest price level assumed to be acceptable for further evaluation. Any tender prices lower than these values are assumed to be extremely low and if chosen they cannot guarantee successful completion of a project. However, some priceslowerthanthesevaluescanstillbeconsidered,provided that the applicants have some supporting factors that contributetotheprojectsuccess. ThecalculationofCOPisdonebasedonthefollowingprocess: IFthenumberofnonfreakpricetenders 10 then IF 0.01 CV ELSE, IF CV

0.21 then X % OR (5) 0.21 then

COP(LowLimit)
Fig.1. AHP Decision Tree for Tender Evaluation Criteria

[(1 0.21 * 1.18) * 0.87 * BWAJ ] / 2 (6)

ELSE IF CV

3.3 GAHP MODEL COP(HighLimit) (1 0.10(1.18)) (7) AHP provides means of making decisions or choices among alternatives, particularly to satisfy a certain goal [15,16] by ELSE decomposing the problem into small manageable components Choosethelowesttenderprice basedonthehierarchystructure: The complexity in preference elicitation comes from the Where, BWAJ Buildersworkfordepartmentestimation fact that a human mind has difficulties to compare together more than two things. Therefore, pair wise comparisons are The statistical analysis process can be performed usedtodeterminetherelativeimportanceofthecriteria. automatically by the system, based on the tender price factor. However, it is also difficult to be totally consistent when Note that X in (5) is 15% for either building, or mechanical manypairsofalternativesarecompared(observedduringthe and electrical work, and 17% for Civil Engineering work validation process of the original AHP operations performed (Malaysian government circulation letter 2005 on tender bythetenderevaluationexpert).GAHPisproposedtoaddress evaluation). The adoption of either one of the above formulae this issue. The operation of GAHP consists of the following in the COP calculation depends on which result produces foursteps: highervaluebetweenequations X % and . StepI:SortingofCriteriaandAlternativesProcess Both horizontal and vertical criteria in a AHP decision matrix arearrangedindescendingorderofimportance.Thatis,from the highest importance to the least. The values of the relative

0.01 then

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importanceofcriteriafedtoGAHPcomefromtheresultofthe Ranking model analysis. Once the sorting process is executed the entry fields in the decision matrix table are positioned on theupperdiagonalofthematrix. Then,theguidelinescanbeprovidedtotheDMsinorder toimprovetheconsistency ofdatainput entrytothedecision matrix. StepII:ProvidingtheGuidelineforDataEntryProcess A set of steps is proposed as a guideline to facilitate the selection of appropriate AHP scales during the evaluation process. The purpose of this guideline is to improve the consistencyofAHPdecisionmatrixfromtheverybeginningas early as from choosing the appropriate AHP input scale. The stepsforchoosingtheappropriateAHPinputscale: Step1 :Beginwiththefirstrowfromlefttoright; Step 2 : Select AHP scales (1 to 9) in ascending order (from smallertohighervaluesasyoumovefromonecolumnto anotherinthesamerow); Step3 :Proceedtothenextrow Step4 :RepeatStep2thenStep3untiltheendofrow The guideline at the top of decision matrix requires the DMstoperformtheevaluationprocessbeginningwiththefirst rowofthedecisionmatrixtable.Inthefirstrow,datamustbe entered according to ascending order from one column to another (from left to right column) as the DMs evaluate the elementsinapairwisefashion.Aftereachcolumninthefirst rowhasbeenevaluated,theycanproceedtothenextrow.The sameprocessisrepeatedinthesecondrowashasbeendonein thefirstrow.Thisprocesscanberepeateduntilthelastrowof thedecisionmatrixtable. StepIII:CalculatingtheItemsofAHPProcess GAHPadoptsAHPmodel.Therefore,theoperationsrelatedto AHP are performed. They include the calculation of criteria weight,consistencyindex,andconsistencyratio. A decision matrix that has been evaluated needs to be checkedforitsconsistency.ThestepsusedbySaaty(1980)and Winston (1991) to determine the consistency of a matrix is adopted: i. Multiply each column of the pair wise comparison matrixbythecorrespondingweight. ii. CalculatethelargestEigenvalueforthematrix. iii. Calculatetheconsistencyindex(CI). iv. Lastly,calculatetheconsistencyratio(CR). StepIV:SortingtheAlternativesProcess Once the overall weights of all the selected alternatives have beenobtainedfromthecalculationsinStepIII,theyaresorted basedonthedescendingorder(fromthehighesttothesmallest values). Hence, the most preferred alternative is positioned at thetopofthelistandtheotherextremeisatthebottom.

NotethatStepI,III,andIVaretheengineofGAHP,whileStep IIisitsmodelbaseinterface.

EMPIRICAL RESULTS AND DISCUSSION

The usability of the proposed methodology is tested using realworld and artificial data sets. The empirical results are to demonstrate the details of the proposed approach in the previous section. The statistical model in the second stage does not require human intervention as the system can automatically calculate the cut-off price for the selected project based on the tender price factor. Fig. 2 shows the screen for initiating the Statistical Model. Fig. 3, Fig. 4 and Fig. 5 are the results of the analysis.

Fig.2. Initiating Statistical Analysis Process

Fig.3. Tender Price Distribution Graph

Weighted model as depicted in Fig. 6 is based on ranking the criteria and the subcriteria in the hierarchy from the most important to the least important. The scale of values that is used while judging the criteria is based on the number of criteriathatarespecifiedforatenderingproblem.Inthiscase, therearefivecriteriaforLevel1,thescalesareintherange1to

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5. Value 1 represents the highest priority, while value 5 is the lowest priority (however, values the other way round can be used to represent the highest and lowest priority). Small integer values are used instead of percentage (%) for ease of comparisonprocess.Itisbelievedthatapersondoesnothave much difficulty to grant a smaller value to a judgment comparedtothegreaterrangevaluessuchas1%to100%.
STATISTICAL ANALYSIS BASED ON TENDER PRICE Project F0107: Construction of School Building (Sek. Keb. Tanjung Gelam, K.Terengganu)

Fig.5. Overall Results of Statistical Analysis

Fig.6. Weighted Model

Fig.4. Result of Statistical Analysis

The next step is to proceed with the GAHP analysis for a detailed evaluation of criteria and alternatives. Fig. 7 shows a sample of criteria evaluation form available in GAHP and Table1showstheoverallweightforeachcontractor.

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the reasoning power of these techniques, reduce decision makingtimeandproduceamoreaccurateresult.Additionally, theapproachenablestheevaluationprocesstobeperformedin a reasonable manner by taking into consideration fairly high tender prices together with other important criteria such as experience, technical staff, capital, and project performance. Futureworkshouldincludeasimilarintegratedmodelundera fuzzyenvironmentasthereareanumberofcriteriawhichare not easily judged based on crisp value. Evaluating the consistency, correctness, accuracy, userfriendliness and automatic value generation in the extended AHP decision matrix table will also be investigated for usability of the system. TABLE 1 OVERALL EVALUATION RESULT BASED ON GAHP ANALYSIS

Fig.7. GAHP Evaluation Form

At the top of the models there are two types of information displayed.Firstly,theinterpretationof19scalesforpairwise comparison of items in decision matrix. Secondly, the guidelinestoassistaDMtoenterconsistentdatainputintothe decisionmatrix. There are possibilities that DMs may enter inconsistent data into the matrixes especially those who are new to the informationsystemordecisionanalysismodels[32].Therefore, thedesignofGAHPmodeltakesintoaccountthisfactor. Once the DM is satisfied with the values in the decision matrix table, the system can be initiated to calculate and displaythesevalues.ThisisdonebyclickingtheKirabutton asshowninFig.7.Basedonthevalueofconsistencyratio,the consistencyofthetablecanbedetermined.Ifinconsistentdata is accidentally entered, the DM can revise the evaluation process of pair wise elements using the clue and guideline provided. At the end of the evaluation process, after all the criteriaandtheselectedalternativeshavebeenevaluated,alist of ranked contractors is displayed together with all the evaluationresults.Itisstronglyrecommendedthatthetender is awarded to the top contractor in the list as it has gone throughdetailedevaluationprocess.

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CONCLUSION
[4]

This article has presented the integration of single criteria and MCDM models for tendering problems. The proposed approach has been implemented in a web based environment to assist DMs for effective evaluation and selection process. Differenttechniquesinthemodelintegrationtakeadvantageof

[5]

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Dr. Fadhilah Ahmad is a Computer Science lecturer at the Faculty of Informatics, Universiti Sultan Zainal Abidin, UniSZA, Malaysia. She completed her PhD degree in Computer Systems in 2009 at Universiti Malaysia Terengganu. In 1996, she received a Master of Science in Information Systems from University of Leeds, England and obtained a Bachelor of Science in Computer Studies from University of Sheffield, England in 1993. Currently, she holds an administrative position as Deputy Dean (Research, Graduate, and Industrial Relations). Her primary research interests are on Decision Support Systems, decision analysis models, information systems, collaborative works, E-learning, E-government, Ecommerce, IT/ICT in society, teaching pedagogy and multimedia applications.

Prof. Dr. Md Yazid Mohd Saman is graduated with PhD from Loughborough University England UK in Computer Science (Parallel Computing). He became a lecturer in 1987 in UPM Serdang, Malaysia. Later he is awarded as Associate Professor in UPM in 1999. He moved to KUSTEM, Malaysia now known as UMT, in 2001. He then became a full Professor in 2004 in KUSTEM. Has an administrative experiences include Head of Department of Computer Science UPM (1996-1998), Head of Department of Computer Science KUSTEM (2001-2002), Deputy Dean (Academic) KUSTEM (2002-2006) and Director of ICT Center UMT (20072009). His research interests include Parallel and Distributed Computing, Network Simulation & Performance, Distributed Software Engineering.