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Caven, V (2006) Career building: women and non-standard employment in architecture. Construction Management and Economics, 24(05), 457-64.

Cheah, C Y J and Liu, J (2006) Valuing governmental support in infrastructure projects as real options using Monte Carlo simulation. Construction Management and Economics, 24(05), 545-54.

Kale, S and Arditi, D (2006) Diffusion of ISO 9000 certification in the precast concrete industry. Construction Management and Economics, 24(05), 485-95.

Liu, A M M and Fang, Z (2006) A power-based leadership approach to project management. Construction Management and Economics, 24(05), 497-507.

Ramsaran, R and Hosein, R (2006) Growth, employment and the construction industry in Trinidad and Tobago. Construction Management and Economics, 24(05), 465-74.

Styhre, A and Josephson, P-E (2006) Revisiting site manager work: stuck in the middle?. Construction Management and Economics, 24(05), 521-8.

Wang, D, Hadavi, A and Krizek, R J (2006) Chinese construction firms in reform. Construction Management and Economics, 24(05), 509-19.

Yiu, C Y and Tam, C S (2006) Rational under-pricing in bidding strategy: a real options model. Construction Management and Economics, 24(05), 475-84.

  • Type: Journal Article
  • Keywords: Real options; pricing; bidding strategy; tendering
  • ISBN/ISSN: 0144-6193
  • URL: https://doi.org/10.1080/01446190600601560
  • Abstract:

    Under-pricing in construction tenders is a common phenomenon and is commonly explained by the need of cash flows and penetration strategy. However, these explanations involve profit cutting and therefore are not plausible in explaining a long-term persistent phenomenon of under-pricing. A real options model is proposed and using the binomial lattice method a real-life construction project tender was analysed to examine how management flexibility and uncertainty provide real options value. When uncertainties of cost items in a tender exist and choices are available to defer and switch modes of construction, then a valuable option is available to the bidders. It amounts to about 4% of the lump sum tendered in our case. The under-priced portion is the options value which the bidder is willing to pay for the flexibility and the uncertainty. These findings enable contractors to be more competitive and to estimate construction costs more accurately in devising their bid strategies.

Zhang, G and Yang, J (2006) Factors influencing the implementation of the raised floor system in Australian office buildings. Construction Management and Economics, 24(05), 529-43.