An evaluation of the risks in estimating and tendering for refurbishment work
This study has been motivated by the lack of research in the substantial
and grow1ng refurbishment sector of the United Kingdom construction
The reasons for inexplicably higher variability in tender bids for
refurbishment work when compared to new work was investigated. This
phenomenon had led to a claim by a large body of contractors that they were
exposed to higher risks in such projects.
The research involved the joint support of a confederation of contractors
and a large number of individual contractors. The methodology adopted
consisted of structured interviews with individual contractors as a means
of obtaining basic information on the refurbishment industry and the
particular problems that contractors have in tendering for such work. This
qualitative information was augmented by quantitative information derived
from measuring the bidding performance of contractors utilising two unique
interactive data bases created from primary data obtained from both sets of
collaborators. The first data base consisting of tender bids for a very
large sample of refurbishment projects, providing global variability
measures which served as indicators of the risk and uncertainty in the
pr1ce prediction process. The second data base consisted of detailed
tender build-ups of competing contractors for a smaller sample of
refurbishment projects drawn from the maln sample; variability measures in
this case isolated the main components of risk in the tender bids.
The most variable main cost component in the tender was the Priceable
Building Work, followed by Preliminaries, Mark-up, Dayworks and Fixed
Price Allowances. The variability in Priceable Building Work and
Preliminaries is founded ln poor and unsuitable tender documentation and
the high reliance upon domestic sub-contractors quotations included in the
tender. Variability ln mark-up has its origins ln the different
perceptions of risk and in the competitive mix in tendering, in terms of
specialism and size of competitors.
The investigation into the confidential cost and price information within
this study has also provided insights into comparative pricing methods and
bidding strategies which have never previously been obtainable. It has at
the same time, provided answers to many of the unresolved questions
overhanging past research studies in estimating and tendering.
The study concludes with a proposal for an optimal method of allocating or
sharing the risk associated with the uncertain nature and unpredictable
costs of refurbishment work. It also draws attention to the fact that
objective statistical measurements of variability for the purposes of
determining risk and uncertainty can only provide part of the information.
There is a need to conduct behavioural studies on the perceptions and
evaluation of the risks in estimating and tendering for construction work.