Contractor’s decision for bid profit reduction within opportunistic bidding behavior of claims recovery

Contractors may decide to reduce the bid profit on basis of opportunistic bidding behavior (OBB) under potential claims recovery for performing changes in work or likely employer’s mismanagement.An analytical evaluation in a decision tree framework is used to represent the expected events and the state of information for OBB decision and their possible outcomes. Quantitative evaluations are introduced to set the likely chance of a claim occurrence, to manage the claim success and to expect a negotiation offer ratio for the profit in claim negotiation. The product output of these parameters sets the conditional contractor’s decision for the price reduction that may be assigned in the original bid. The presented methodology provides an applicable decision technique for use by contractors to benefit from the potential uneven events caused by employer’s acts during project phases to reduce the bid profit on price based competition case which is a significant item in a typical competitive bidding.