Appraising & Financing a Construction Development

Appraising & Financing a Construction Development

Question 1

In order for a bid to be successful, the decision involved in the bid making should be looked upon from each and every angle. Time is of the essence, since, if the company fails to make the bid on time or does not make a bid altogether, then that means that the company has lost an opportunity. According to Shash (1993), the process involved in coming up with a bid making decision, is quite a complex and difficult one to be made. If the company decides to bid hastily then the cost will be incurred almost immediately with little or no guarantee of generation of any revenue since no appraisal would have been made due to lack of time. Such an incorrect decision can force the company into a very delicate situation where the contractor placing the bid can even lose its reputation, capital and its operating capacity. Egemen and Mohamed (2007) are of the same opinion that no bid / bid decision making is impacted through complex situations (external) and certain project characteristics. The decision making for the bid is quite complex and requires considering numerous factors that are extremely relevant and vital to achieve the perfect decision.

Factors affect the bid/ no bid decision making

Various factors affecting the bid/ no bid decision making process are present in this situation. The effects of the factors depend on various elements. The bidding decision considerations are varying from one country to others. The factors fall within six categories which are given below

Competitions

Need for work

Project conditions contributing to profitability

Risks of the project

Strategy considerations

Strength of firm

Competition

This is basically analyzed from two aspects: Competition considering the current industry circumstances and considering the present project. The contests in the present project that mainly concentrate on the variety of the aggressive opponents involved in putting in a bid and the opponents bid performance. Competition appearing in the industry indicates that variety of other prospective in the market, the highest possible mark-up achievable and the numbers of new companies entering the industry is enhancing competition. (Egemen & Mohamed, 2007).

Wanous and Boussabaine (2000) and Egemen and Mohamed (2007) discover that competition is not essential. This outcome is contested by several writers who believe the chance of successful the soft is extremely relevant to competition. (Shash, 1993), (Chua & Li, 2000) and (Bageis & Fortune, 2009). This has been verified by Drew and Skitmore (1997) where companies are more liable to bid for the project that they are more competitive at.

Shash (1993) discovered that competition is especially suffering from the different agreement styles. There are two ways recommended by Drew and Skitmore (1990) to win the contract: the first is by a specialist providing a very reliable bid for an identical project and has a very high aggressive bid performance as to the other contractors; the second way is by a contractor providing an unreliable bid and has a low likeness of bid performance to ...