|M.Sc Student||Latner Erez|
|Subject||Applying the Analytic Hierarchy Process for the Selection|
of General Contractors for Construction Projects
|Department||Department of Civil and Environmental Engineering||Supervisors||Professor Emeritus Aviad Shapira|
|Professor Yehiel Rosenfeld|
Most public sector construction and infrastructure tenders are price based, meaning that the main criteria for winning is the lowest offer. Therefore, to win the tender, a contractor must offer the lowest price. Contractors sometimes tend to offer a price lower than the cost of work. They depend on alterations to plan as a source for additional income that will allow completing the work without loss. This phenomenon is called “Winner's Curse”.
The present research attempts to address these issues by: (1) providing a simple, measurable, and easy to understand model to select the primary contractor in a tender, using Analytic Hierarchy Process (AHP), one of the existing MCDM models, as a guiding tool; and (2) developing a "generic" model that allows the end user to customize the hierarchy and the criteria's weights to the project's requirements.
In order to develop the research model, two rounds of personal interviews were conducted with a group of experts in the field of construction and project management. During the interviews the experts were asked to assess the criteria that should impact the selection of a contractor in a tender and to determine these criteria's relative weights, according to the AHP methodology. Assuming no one model fits all projects, the interviewees were asked to determine independently the criteria and weights that most impact a contractor for budget, time, and quality oriented projects.
Our analysis shows that experts agree that price is not the only criterion and not even the most dominant criterion that should impact a selection of a contractor. Our survey's results helped determine the final weights for edge cases in which projects are completely oriented toward one factor (budget, time, or quality). Realistically, there are other instances in which there is a need to balance between requirements to meet budget, time, and high quality construction. The two-phase model that was developed in the course of the research enables decision makers to balance as required and determine the weights accordingly.
In the first step of the two-phase model the decision maker needs to determine the character of the project (i.e. the extent to which the project is budget-, time-, and quality-oriented). The decision is made according to the AHP methodology. After determining the project's character and adjusting the criteria's weights in the hierarchy to the project's unique character, in the next phase the decision maker ranks the contractors' offers according to the criteria and the relative weights.