Critical contractor selection factors for major projects

Abstract

Tender evaluation and contractor selection for the delivery of major projects and services is acknowledged as a complex undertaking that embodies many uncertainties. The criteria used for making judgments about potential suppliers and their ability to deliver are varied and many, and often traded-off on the basis of multiple conflicting objectives and stakeholder values. The research investigated the contractor selection process to identify and establish the relative importance of common criteria used in an actual choice of contractor for major projects. The primary objective of the research is to advance the knowledge and understanding of Contractor Selection, with particular emphasis toward determining which factors (criteria) influence the choice of contractor. The research embodied two primary studies. The first included a literature review and exploratory survey to identify relevant criteria used in the evaluation of tenders and selection of contractors. All identified and reported criteria were reviewed and sorted into defined categories. The number of occurrences in each category was recorded and threshold tests then applied to determine the principal criteria used to evaluate tenders. From this, eight (8) principal criteria were identified. Findings indicate that the preferred criteria for evaluating tenders are those which provide a measure of a contractors’ ability in terms of their management and technical capability, past experience and performance, reputation, and the proposed method of delivery or technical solution. The second study investigated the relative importance of the eight (8) criteria identified from the previous study, plus the criterion of cost or price using a Discrete Choice Experiment (DCE). The approach provided a statistical basis for generating Choice Sets, each of which described three alternatives in terms of all nine criteria, or attributes, but with different levels. A series of Multinomial Logit Models (MNL) were developed from two hundred twenty two (222) respondents to determine the influence each criterion has on the actual choice of Contractor. Results were statistically significant, indicating past performance, technical expertise, cost/price and project management expertise as the most important criteria in the actual choice of contractor. Organisational criteria, such as company experience and reputation were found to be considerably less important.