A heuristic bidding price decision algorithm based on cost estimation accuracy under limited engineering man-hours in EPC projects

Abstract

In this paper, we develop a heuristic bidding price decision algorithm in consideration of cost estimation accuracy under limited engineering Man-Hours (MH) in Engineering, Procurement, Construction (EPC) projects. It allocates engineering MH for cost estimation, which determines the cost estimation accuracy, to each order under the limited volume of MH, and then determines the bidding price for maximizing the expected profit based on cost estimation accuracy under the deficit order probability constraint. Numerical examples show that the bidding price decision in consideration of cost estimation accuracy and deficit order probability is essential for the contractor in making a stable profit in EPC projects, and that the developed algorithm is effective for making such bidding price decision.