My Proposal

ARBA MINCH UNIVERSITY, INSTITUTE OF
TECHNOLOGY FACULTY OF CIVIL ENGINEERING,,

SCHOOL OF POST GRADUATE STUDIES
MSc THESIS PROPOSAL

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR
THE DEGREE OF MASTER OF SCIENCE IN
CONSTRUCTION TECHNOLOGY AND MANAGEMENT
06/18/2023 MSc Thesis proposal by Bereket Badege

1
Tittle:- Modeling Contractor’s Bid
Markup Estimation For public
building Construction Projects In
SNNPR, Gamo zone
By: Bereket Badege

Principal advisor: Dr. Ephrem Girma
May, 2023
Arbaminch, Ethiopia
2
contents
1. INTRODUCTION
Background
Statement of the problem
Research questions
Objective of study
Significance of the study
Scope of study
2. RESEARCH DESIGN AND METHODOLOGY
Study area
Research design and approach
Data collection and analysis
Developing the model
Strategies of ensuring data quality
3. WORK SCHEDULE AND BUDGET REQUIREMENT
3
1. INTRODUCTION
Background
• The construction industry is a vital sector in
developing countries, providing mainly new
infrastructure in the form of roads, railways,
airports as well as new hospitals, schools, housing,
and other buildings (Khan, 2008).
• According to plan and development commission
the construction industry in Ethiopia is anticipated
to enlarge through by 4.7% in 2021.
• The construction industry in Ethiopia is projected
to develop at an annual common boom price of
greater than 8% by 2026.
4
Background cont…
• The procurement of building construction works in
Ethiopia is mostly competitive bids.
• The low bid (LB) model treats the bid with the
lowest price because the most beneficial to the
client.
• The practice of the lowest price tendering is
observed to bring about the low exceptional of
labor, claims, disputes, and time overruns, in
particular in the instances of economic downturn
whilst the orders are scarce (Ioannou, P.G., & Leu,
1993)
5
Cont…
•It is important that to consider a bid
as being made from two elements;
A. direct cost, which incorporates
labor cost, material costs, equipment costs,
and direct supervision cost and,
B. Indirect cost named as markup or return,
which have to be sufficient to cover a portion of
known overhead cost and permit fair earnings
at on investment (Hendrickson, 2003).
6
Cont…
•Markup is a factor that estimators apply to

certain items, systems, or to the total cost of a
bid to cover general overhead, profit, and other
indirect costs(Association for the Advancement of
Cost Engineering International (AACE) )
•Many researchers have studied the improvement
and use of bidding models for the optimization of
contractors' bid prices in competitive bidding
situations (Park & Chapin, 1992).

7
CONT…
•Ling and Liu (2005), Christodoulou S. (2010)

and other research also use ANN approach of
modeling for bid markup estimation.
•Min Liu and Yean Yng Ling(2005) developed
contractors markup estimation model using
Fuzzy Neural Networks and they have
compared the model effectiveness and
practicality of both ANN and Fuzzy Neural
Networks technologies in markup estimation
8
Cont…
•There are a number of studies in Ethiopia

related to cost estimation of construction
projects in general, the issue of bid markup
decision making has received limited
attention.
•Thus, this study will focus on assessing various
factors influencing bid markup estimation and
developing a model that facilitates local
contractors’ decisions on project bid markup
size during competitive bidding in Gamo zone
public building construction.
9
 Statement of the problem
The normal layout of a bidding process is primarily

based on the guideline that -all different matters being
same - the agreement might be presented to the
competitor which submitted the lowest bid i.e., the
least rate (Cheung, Wong, Fung, & Coffey, 2008).
 It is simple that the client’s decision is very
trustworthy
However the contractor’s choice on what rate to bid is
greater hard to attain, being probably one of the most
difficult choices construction managers must face all
through the competitive bid process (Li & Love, 1999).
10
Statement of problem cont…
Nourah (2013) in his study stated estimating the
markup percentage is perhaps one of the most
important and difficult decisions for a contractor
when making a bid for a project as the markup
estimate has to be low enough to win the contract
but high enough to make a profit.
Ling and Liu (2005) stated that deciding on a bid
markup is a hard task due to the fact many
uncertain and complex elements want to be
considered within the tendering stage.

11
•Tadesse (2006) prepares a construction cost
estimation guideline for local contractors to
establish the unit costs and broaden to the
total construction costs.
•This study treats all bid as the identical and
recommend a uniform bid markup length to be
carried out.
•But this does not mirror the reality that the
scale of bid markup to be used by contractors
need to include the effect of numerous traits
which affect bid markup estimation.
12
• Danait (2015) has carried out a studies to evaluate the
cost estimation trend of local building contractors.
• Majority of the local contractors estimate their
overhead cost as percent of the total project cost.
Accurate understanding of the value and the
dimensions of the project and assessment of threat
and profit allowance are important tools in cost
estimating method.
• Although this study factors out that local contractors
has to calculate their widespread overhead costs in
detail manner but it does not answer how this may be
achieved and how to decide the size of earnings size.
13
• Ameneshewa (2020) has done a research to
identify and analyze the factors which are
specifically considered by local contractors in
bid markup estimation during competitive
bidding for federal road projects in Ethiopia.
• The researcher developed the model by ANN
and MLR and suggested both methods will be
used in estimating markup while ANN has its
own draw back. The researcher does not worked
on building construction projects.
14
•In the formerly cited research gap in
Ethiopian context,
•This study will focus on figuring out
various factors affecting building projects
markup size and developing a model to
for estimating bid markup size that can
produce a balance between the chance
of winning a contract and a profit
obtained by the contract.
06/18/2023 MSc Thesis proposal by Bereket Badege 15
 Research questions
•What are the factors which impact bid

markup estimation in building construction
projects in SNNPR, Gamo zone?
•How those factors be used to develop a
model to help & improve the overall
performance of local building contractors’
decision making of bid markup size for the
competitive bidding for public building
construction projects?
 Objective of study
• The general objective of the study is modelling contractors bid
markup estimation in public building construction projects in
case of SNNPR Gamo zone.
Specific objectives of this study are: -
• To review factors that have an effect on decisions on bid
markup size estimation for public building construction
projects in Gamo zone.
• To determine significant factors in bid markup estimation in
the course of competitive bidding for public building
construction projects in Gamo zone.
• To develop a bid markup estimation model that could guide
local contractors’ choice making for bid markup size in bidding
for public building construction projects in Gamo zone.
Significance of the study
This study is done on purpose
To help local building contractors to understand
the factors that have an effect on their decisions
when figuring out bid markup size.
To conquer their shortcomings in judgment and
constrained quick-term reminiscence, which
prevents them from processing huge amounts of
information.
Upgrade their profitability and capacity to win
contracts by sustaining in the construction
industry.
 Scope of study
The scope of research is limited to the following concepts;

•The definition used for markup for this research is adopted
from AACE (2017)- a fact that estimators apply to certain
items or to the whole cost of a bid to cover overhead cost
and profit.
•This research involved in that local contractors seeking
project by being least responsible bidder.
•This research aims to enhance the overall performance of
local contractors’ capability to estimate systematic markup
size in bidding for public building construction projects in
Gamo zone, thus study population for the required data
collection will include grade one GC/BC local contractors
who are currently working in public building construction in
SNNPR Gamo zone
2. RESEARCH DESIGN AND METHODOLOGY
 Study area
Gaamo Zone is a zone in the
Southern Nations, Nationalities, and Peoples' Region of
Ethiopia. Gaamo is bordered on the south by the Dirashe
special woreda, on the southwest by Debub (South) Omo
zone, on the northwest by Gofa zone, on the north by
Wolayita zone, on the northeast by the Lake Abaya which
separates it from the Oromia Region, and on the southeast
by the Amaro special woreda. The administrative center of
Gaamo is Arba Minch city. Gamo zone is subdivided in to
14 administrative woredas and 5 city administrations.

 Research design and approach
This research will deploy both qualitative

and quantitative techniques.
Qualitative;-to identify the key factors
influencing bid markup decisions and
 Quantitative develop a model for bid
markup estimation for public building
projects in the Gamo zone.

CONT…
• This research will be a descriptive type of
study because it is going to describe the
important factors affecting bid markup
estimation in Gamo zone public building
projects.
• And also it will be an applied and exploratory
type of study; because its motive is initiated
for solving a practical problem and pursuing to
explore the percentage of bid markup which is
for use through the bidding of public building
projects respectively.
Data collection and analysis
• Study population
• The study population for this research will be
all active public building construction projects
which will be executed by contractors having
Grade one GC/BC licenses. Since Gamo zone
urban development and housing department
(UDHD) is responsible for the administration
of public building construction contracts at
zonal level, the lists of contractors will be
obtained from Gamo zone urban development
and housing department.
Data collection and analysis cont…
Sample size determination

Based on the data which will be obtained from Gamo zone
UDHD active public building construction projects which
are executed by grade-one local contractors is being
determined and professionals from each project is
selected to respond the questioner. Accordingly, the
sample size of the population for the research will be set
equal to the number of active public building projects and
a questionnaire was distributed to all. Or alternatively, if
some constraints happened to access all public building
construction projects sample size will be determined using
equation of sample size determination from finite
population (Joe, James & Chadwick, 2001). which is:-
Sample size determination cont…
Alternatively, if some
constraints happened
to access all public
building construction where
projects sample size • n is the sample size ,which is
will be determined calculated using infinite
using equation of populatin
sample size • z is the z-score
determination from
• p is the population proportion
finite population (Joe,
James & Chadwick, • ε is the margin of error
2001). which is:- • N is the population size

Method of data collection and measurement
• A structured questionnaire will be prepared to

analyze contractors‘ behavior when they perform
their bid markup size decisions (bid markup factors
that they consider) in bidding for public building
construction projects.
• Respondents are additionally asked to list other
factors that they deem critical for bid markup
estimation and rate their degree of significance. An
ordinal scale statistics measurement approach will
be used for the data which will be collected through
the questionnaire survey.
Method of data collection and measurement
• 5-factor Likert scale, which use integers in ascending
order, is used for rating and ranking of the data.
scale Meaning
0 No impact
1 Little degree of impact
2 Average degree of impact
3 High degree of impact
4 Very high degree of impact

Method of data analysis
• A relative importance index (RII) technique will

be used and each factor is ranked based on a
calculated index. The relative importance index will be
calculated using the equation (Tawil, 2008);

Developing the model
• The other part of the questionnaire will be carried

to gather actual public building projects‘ past bid
facts from the study population regarding their
percent of bid markup size.
• After collecting and organizing the data, estimation
models were developed using multiple linear
regression (MLR) and fuzzy neural network (FNN)
techniques to generate bid markup size. The
performance of the developed models will be
tested using several statistical indicators.
Strategies of ensuring data quality
• Pilot study;- In this study 15 questionnaires will be
distributed for pilot study to professionals having good
experience in building construction projects.
• Validity;- This research will try to addresses validity through
the review of literature and adapting units used in
preceding studies.
• Reliability;- Internal consistency or reliability could be
assessed in this study by the use of Cronbach's alpha. It acts
as a gauge of reliability and "internal consistency."

3. WORK SCHEDULE AND BUDGET REQUIREMENT
work schedule

Budget breakdown
No Description Cost(ETB)
1 Material & service cost 14,500
2 Transportation 5,000
3 Per.Diem 4,000
4 Contingency 10% 2,350
25,850
Grand total

A N K
TH
O U !
06/18/2023
Y
MSc Thesis proposal by Bereket Badege 33

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ARBA MINCH UNIVERSITY, INSTITUTE OF

TECHNOLOGY FACULTY OF CIVIL ENGINEERING,,

MSc THESIS PROPOSAL

06/18/2023 MSc Thesis proposal by Bereket Badege

By: Bereket Badege

•Markup is a factor that estimators apply to

06/18/2023 MSc Thesis proposal by Bereket Badege

•Ling and Liu (2005), Christodoulou S. (2010)

•There are a number of studies in Ethiopia

The normal layout of a bidding process is primarily

06/18/2023 MSc Thesis proposal by Bereket Badege

•What are the factors which impact bid

The scope of research is limited to the following concepts;

06/18/2023 MSc Thesis proposal by Bereket Badege 20

This research will deploy both qualitative

06/18/2023 MSc Thesis proposal by Bereket Badege 21

Sample size determination

06/18/2023 MSc Thesis proposal by Bereket Badege 25

• A structured questionnaire will be prepared to

06/18/2023 MSc Thesis proposal by Bereket Badege 27

• A relative importance index (RII) technique will

06/18/2023 MSc Thesis proposal by Bereket Badege 28

• The other part of the questionnaire will be carried

06/18/2023 MSc Thesis proposal by Bereket Badege 30

06/18/2023 MSc Thesis proposal by Bereket Badege 31

4 Contingency 10% 2,350

06/18/2023 MSc Thesis proposal by Bereket Badege 32

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