OPTIMIZING CONTRACTOR’S SELECTION

AND BID EVALUATION PROCESS IN

CONSTRUCTION INDUSTRY: CLIENT'S
PERSPECTIVE

construction project is directly impacted by the selection of a

suitable constructor.
Abstract—Construction in developing countries is often encountered
with multifarious challenges including contractor’s performance due Sajjad Shuker Ullah, Capital University of Science and Technology (phone:
to lack of qualification and resources. According to Public 0092-333-5888444442; [email protected])
Procurement Regulatory Authority, “lowest bid” criterion is a binding
in public procurements; however, contractors exploit the loopholes in
the existing bid process management system. The core reason for this
underperformance is the continuous use of lowest bid selection. This
paper scrutinizes the prevalent rules for bid evaluation, and Choosing the best contractor is a critical decision for both
investigates the criterion used by both clients and consultants in project managers and owners. Huang (2011) argues that a
selecting the contractors, during the bids evaluation phase of competent contractor is an indispensable component required
construction project in Pakistan. It was discovered that proper for the completion of a construction project throughout its
planning, creditworthiness, transition plans, plant and equipment project lifecycle. A major issue that hinders the success of a
holding, financial stability, past performance and quality were the most construction project is bid evaluation and contractor’s
imperative factors used by clients and consultants for the contractor’s prequalification, faced by numerous construction industries
selection. The paper contributes to the body of knowledge by revealing around the world (Huang, 2011; Idrus et al., 2011; Mahdi, 2002;
the significant factors impacting the contractor’s selection and bid Hatush and Skitmore, 1997; Holt, 1997; Holt et al., 1993; Holt
evaluation process in a developing country. et al., 1994). Causes of this issue vary depending on the culture,
environment, processes, and organization of the construction
industry. Researchers have found that mismanagement within
the bidding and procurement process, and the lowest bid
Keywords—Contractor’s selection; Bid evaluation; Client's criterion cause failure or delay in the completion of construction
perspective; Construction industry; Pakistan
projects (Holt, 2010). Nevertheless, many construction
industries in developing countries’ are still using the lowest bid
I. NTRODUCTION selection process for awarding the contract.

T he construction industries in developing countries are

Though, alternative bidding systems are suggested in previous
studies to ensure quality of construction projects, developing
usually daunted with diverse challenges, such as contractor’s countries are slow in adapting them (Rao et al., 2018; Elsayah,
performance due to lack of qualification and resources (Huang, 2016; Taylor et al. 2014; Cristobal, 2011; Palaneeswaran &
2011). The inefficient contractor’s selection criteria, being Kumaraswamy, 2000). Farooqui et al. (2008) found that
adopted by the employers for procurement of civil work, result outcomes of alternative bidding systems produce high
in persistent cost and time overruns and imminent quality issues competition in the construction industry, eventually leading to
(Holt, 2010). Resultantly, experienced contractors manage to higher performance of the contractors. Thus, developed
exploit the loopholes in the existing bid evaluation processes countries shifted to “best value procurement” bidding system.
(Mahdi, 2002). On the contrary, in developing countries the construction
industry is underperforming although solutions to the issues
The construction projects pass through various complex stages, have been proposed. The core reason that underperformance has
starting with the primary stage of bidding in which a project is become epidemic in developing construction industries is the
awarded to a contractor. Awarding a project to a suitable apathy to change, and continuous use of lowest bid selection
contractor is a difficult process (Idrus et al. 2011). Alhazmi and process (Farooqui et al., 2008).
McCaffer (2000) argue that the successful completion of a
 Construction industries vary in terms of their process of bid using a quantitative model for choosing contractors. In a further
evaluation based on the countries they operate in and the study conducted by Holt et al. (1995), it was revealed that
environment that industry offers. Hence, the process of choosing a contractor needs to be based on the value of money
contractor selection and bid evaluation is reliant on differing instead of automatically picking the one with the lowest bid, as
decision criteria based on geographic location. Research the primary aim of the process is to identify the best tender and
conducted in different countries of the construction industry not the lowest bidder. Hatush and Skitmore (1997) and Shrestha
reveal the existence of various decision criteria when it comes et al. (2014) argued that many clients of construction projects
to choosing an appropriate contractor. Recognized universal have varied methods of quantifying the criteria, while others
factors considered in the process of assessing a contractor resort to a subjective assessment of contractors based on the
includes project packaging, invitation, prequalification, short information solely provided by the contractor under assessment.
listing and bid evaluation (Idrus, et al., 2011; Hatush & Morkunaite et al. (2017) recently found the same trend in this
Skitmore, 2010; Holt, 2010). Aforesaid in view, it has become day-and-age in which construction clients select contractors
imperative to understand whether the indicated universal factors based on the lowest bidder, making the lowest price a dominant
influencing the contractor’s evaluation during the bid process requirement in contractor selection. In contrast, Morkunaite et
are equally effective in a specific region or not? al. (2017) argue that only considering the lowest price as a
requirement for rewarding the contract may cause the client to
In Pakistan, Government has developed and enforced Public choose an “unqualified, incompetent, inexperienced, and
Procurement Regulatory Authority (PPRA) rules in 2004 for the insufficiently financed contractor”. Polat (2016) also asserted
procurement of public works. According to PPRA, “lowest bid” that selection of an inappropriate contractor can result in
criterion is a binding in public procurements, and the guiding massive additional costs caused from rework of the project due
factors followed for contractor’s selection are: experience, past to “poor quality of work, claims, disputes, litigation, adversarial
performance, personnel, financial position, plant and working conditions, penalties, abandonment or work, and even
equipment, and management capability. Despite, adhering to bankruptcy” (p. 1049).
the recommended procedures, key construction stakeholders
still concede that flaws and short comings exist in the Few of the researchers proposed varying construction selection
contractor’s selection, bid evaluation, and procurement system. criteria. El-Sawalhi et al., (2007) identified five main criteria for
A study conducted by Haseeb et al. (2011) found that 80% of prequalification and bid evaluation which include: financial
construction projects in Pakistan faced delays, and only 20% soundness, technical ability, management and technical ability,
were completed within the scheduled time and cost. Based on experience of contractor, performance of contractor, resources,
the analysis by Haseeb et al. (2011), a major portion of delay in quality management, and health and safety issues (p. 473).
large-scale projects is associated with contractors, such as Hatush and Skitmore (1997) and Choi et al. (2006) also
inadequate experience, improper planning, and poor site identified these additional criteria, as universally accepted, for
management. Others have found that poor contractor’s selection the selection of contractors and bid evaluation, including:
method used in Pakistan lead to cost and time overruns causing primarily financial capability, technical capability, team
disputes between clients and contractors (Ahmad et al., 2015; management, and health and safety track record of the
Khan et al., 2015; Farooqui et al., 2008). It is evident that there contractor under consideration. Other common criteria that has
are specific issues in Pakistan associated with selecting an overlapped between researchers for contractor evaluation and
appropriate contractor during the bidding process for awarding selection, include: financial stability, technical qualification,
construction projects. Moreover, consultants also play a key technical capacity, knowledge of technical personnel,
role in bidding process to select the most suitable contractor. experience, management capacity, relationship with others and
past performance, reputation, health and safety (Kang and Kim,
Of the universal factors cited in published literature, it is 2018; Jafari, 2013; Cheng & Li, 2004; Kaklauskas et al., 2006;
imperative to analyze which of them are essential in choosing a Niento-Morote & Ruz-Vila, 2012; Vahdami et al., 2013; Hwang
contractor. Therefore, it is important to uncover essential & Kim, 2016; Darvish et al., 2009; Fong & Choi, 2000;
criteria used for contractor’s selection and bid evaluation in the Zavadskas et al., 2008 a&b; Banaitis and Banaitiene, 2006).
construction industry of Pakistan. Hence, the current study Other researchers have moved away from the criteria that values
identifies and examines contractor’s selection and bid financial stability to price or bidder price criteria (Braauers et
evaluation criteria through a complete assessment of published al., 2008; Holt, 1998; Marzouk et al., 2013). In addition to the
literature, as well as, the criteria stated by PPRA. The study also main financial criteria, researchers have introduced few more
introduces the analysis of other unique factors that may impact criteria, including: physical and human resources (Woo et al.,
the decision for bid evaluation and contractor’s selection. 2017; Cheng & Li, 2004; Fong & Choi, 2000), time (Zacadskas
et al. 2008; Holt, 1998; Banaitis & Banaitiene, 2006; Chinyio et
II. LITERATURE REVIEW al, 1998), quality (Zavadskas et al., 2008; Holt, 1998; Turskis,
Published literature within this sphere has identified different 2008; Banaitis & Banaitiene, 2006; Enshassi et al., 2013), risk
sets of criteria and other factors that can be used when assessing (Turskis, 2008; Banaitis & Banaitiene, 2006), and past
a contractor for their appropriateness in a construction project relationships with clients and other contractors (Fong & Choi,
(Biruk et al., 2017). Holt et al. (1994) is noted as being one of 2000; Zacadskas et al., 2008).
the first academics to identify prequalification requirements
 The literature indicates that the selection of a contractor for a participants to provide information on their company, their
construction project varies depending on the client. The experience, job title, and opinions on contract procurement
priorities and requirements of clients and consultant vary processes and the Public Procurement Regulatory Authority
depending on the nature of project for contractor. Chinyio et al. Ordinance, 2002. This questionnaire was developed using 21
(1990) conducted a study to uncover details of specific sub criteria that impacted the contractor’s selection and bids
requirements that can be used as guidelines for the process of evaluation which was extracted from literature including Liu et
contractor selection. Another study determined the ranking of al. (2017), Biruk et al. (2017), Ahshar and Amiri (2010), Salama
35 different criteria followed in the contractor selection process et al. (2006), Choi et al. (2006), Topcu (2004), Palaneeswaram
by Ng and Skitmore (1999). The results showed that there is and Kumaraswamy (2001), Skitmore (1999), Hatush and
huge difference in the use of selection criteria as per the ranking Skitmore (1997), and Holt et al. (1995). The criteria derived
of consultants and clients. Similarly, a conceptual model to from this extensive review of literature was grouped further into
measure the impact of different criteria for bid evaluation is five main criteria. The scale developed was based on the Likert
developed for the construction industry of Saudi Arabia by five-point scale – (1) not important, (2) slightly important, (3)
Alsugair (1999). A single prequalification or selection criteria important, (4) very important, and (5) extremely important. The
has different significance depending on the requirements and Likert scale used is to judge the severity of indices of different
nature of selection committee and environment of the specific criteria adopted for the contractor’s selection and bids
industry. A survey was conducted in UK to know the perception evaluation. The last portion of the questionnaire outlines items
of different clients and consultant about single criteria by Ng et identified as issues associated with successfully completing a
al., (1999). The perceptions of clients about factors to be construction project. Participants are asked to identify the
considered for selection of contractor greatly associate with threshold of the issue by indication its rating severity from a
each other when they are asked about a same project in both choice of low, medium, and high. The last question asks the
public and private sector (Wong et al. 2000). participant to indicate the type of evaluation that carries the
most weight in selecting a contractor, once again providing a
Idrus et al. (2011) produced a tabulation of criteria for selection severity scale of low and high
of main contractor from the literature review. The table is
outdated as further research has been conducted in the area and .
therefore needs to include literature that has identified some of
the universal contractor selection criteria. A continuation of the B. Pilot Study
Idrus et al. (2011) is presented in Table 1 A pilot study was conducted using the developed research
instrument. The purpose of the pilot study was to comprehend
III. METHODOLOGY the research instrument which is used in the main study of this
research. Mani et al. (2017) exclaims that pilot studies assess
A. Data Collection
the feasibility of the process and research instrument which are
Development of the research method used in the current study considered to be the key to success in the mail study. The
entails examining traits or parameters of the construction research paradigm used for conducting the pilot study is
industry population in Pakistan. The population used in the positivism, a continuation of the philosophical arguments
current study is a group of individual units that entail some form previously made. The pilot study used ten participants that are
of commonality that is useful to the study. The current study contractors employed in Pakistan’s construction consultation
uses a representative sample of the population to draw data from industry and are registered with PEC. The purpose of
in order for the results of the study to be generalized to the conducting the research trail with these participants was to
population as a whole. The study derives its participants from comprehend the extent of the questionnaire to engage
authorized construction consultants that are involved in contract participants and extract viable information. The questions
awarding activity and are registered with Pakistan Engineering designed were closed-ended which limited the respondent’s
Council. Pakistan Engineering Council (PEC) has 1,924 answers with a list of answer choices which is recommended by
registered valid consultant firms employing thousands of Dillman et al. (2009).
consultants in Pakistan. The actual list amount of consultants is
unavailable making is difficult to choose a concrete sample size. Severson et al. (1994) argues that a research instrument has to
However, analyzing the requirements of the current study a derive maximum information from participants which can only
conclusion was drawn that a sample size of 200 was adequate be done if the questions are straight forward but targeted to
to represent the population. The sample size range is answering the research questions. Therefore, the questions need
recommended and used in Maqsoom et al. (2017), Basir (2015), to be brief with a straight answer but still be meaningful enough
and Bageis and Fortune (2009). Pakistan Engineering Council to extract conclusions during the analysis phase of research. The
was sent 200 questionnaires with the instruction to randomly questionnaire is considered effective to the extent that it is able
distribute it amongst registered construction consultants. to provide the current study with rich data that is not available
Questionnaires that were appropriately completed without in the current academic literature published on this topic. The
missing entries were included for analysis in the current study. current questionnaire’s effectiveness is resultant from its
targeted questions that are an adaptation of the literature
The current study uses a questionnaire developed by the reviewed. All questions within the pilot study were easily
researcher. The first portion of the questionnaire asks answered by all participants, with not one question being left
out or unanswered. However, the questionnaire was reviewed based on the principles of evaluating internal consistency that
and adjustments were made by reducing the sub-criteria of may extent between the items of the designated variables. A
contractor’s selection and bid evaluation to 18 factors. method of conducting this test is Cronbach’s Alpha; the
measure is a representation of if the items involved in measuring
IV. FINDINGS the desired variable are a good fit or not. This means, if the
proposed items on the scale are attributed to a variable may
A. Demographic Results
bring about the right answer in each of the attempts made.
The proposed sample designated for the current study was 200. Values greater than 0.7 are considered a good fit. DeVeillis
The questionnaire was sent to Pakistan Engineering Council (2012) provided the rules for identifying internal consistency.
(PEC) to distribute among consultants and clients to respond to. Cronbach’s Alpha values for scale items related to contractor
However, only 119 questionnaires were considered and criteria were analyzed for reliability. The results show that the
incorporated into the study as the remaining questionnaire were items produced an alpha of .855 which lies between 0.9 ≥ α ≥
incomplete. Based on the demographic analysis of the 0.8, considered as ‘good’ (See Tables 5 and 6).
questionnaires, a total of 87 were clients while the remaining 32
were from consultants. Table 2 illustrates the total number of The remaining 14 questions in the questionnaire asked
questionnaires returned as well as the response rate of the respondents for experience (i.e. individual and organization),
sample population. The total response rate of the population severity indexes, procurement method preferences, and other
sample is 59.50% which is considered to be a decent response questions related to contracts and procurements. The alpha
rate. Each of the respondents was analyzed for their personal produced .845 also lied between the values considered ‘good’.
experience in the construction industry and the experience of It is therefore concluded that the questionnaire produced will all
the organization that employed them. its items holds a fair internal consistency making the items in
the study’s questionnaire measured as one-dimensional.
A majority of the respondents (i.e. 93 in total) in the study had Although alpha value is considered imperative by many
an individual experience of 16 to 20 years. The data reflects that academics to measure and included in research; there are other
88 individuals with 16 to 20 years of experience also worked for studies like one conducted by Cortina (1993) and Cheng et al.
their current organization, garnering organization experience, of (2014) that argues that the use of alpha is overrated. Cheng et
16 to 20 years. Of the 119 returned responses, only 12 al. (2014) asserts that the greater the number of items on the
respondents had personal experience of 6 to 12 years. The analyzed list, the greater the influence on artificially inflating
composition of experience is illustrated in the figures 1 and 2. the value of alpha.
A key question asked to respondents in the questionnaire was C. Normality Results
about the type of procurement (contract) offered to contractors
The data collected from the questionnaire was then analyzed
in the last five to ten years. The responses of participants as
for normality. In order to test for normality, the following
shown in Table 3 indicate that traditional contracts were most
hypotheses were developed:
awarded to contractors in the last five to ten years in the Pakistan
construction industry, with 59 respondents indicating this H0: The sampled population is normally distributed.
choice on their questionnaire. The remaining 32 respondents
indicated that Turnkey procurement contracts were widely used H1: The sampled population is not normally distributed.
in the industry over the last ten years. Respondents were also
To test these hypotheses, the Kolmogorov-Smirnov (K-S) test
asked to indicate which method of evaluation they believed to
for normality was conducted using IBM’s SPSS. The results of
be the most effective in selecting the ‘best’ contractor to obtain
the test are displayed in the Table 7. The results show that the
value for the client. The respondents’ answers were tabulated
population is normally distributed as soon by the K-S statistic
with procurement contract to draw a comparison between the
value and the significance value being greater than 0.05
two. According to Table 4, 61 respondents indicated that multi-
(Sig.>0.05). In a normal distribution, the significance value
criteria method of evaluation would provide clients with the best
must be greater than 0.05. Hence, it can be concluded that there
value from a contractor. On the other hand, 58 respondents
is not enough evidence to reject the claims that the sampled
indicated that the single step criteria that only included bid price
population is normally distributed. Therefore, the data in the
was the best method to evaluate a contractor. Respondents that
study came from a normally distributed population. We reject
showed preference to the multi-step method also indicated that
the H1 hypothesis and accept H0.
(41 participants) traditional contracts were most awarded to a
contractor. This is followed by 32 respondents who preferred Relative Importance Index (RII) Results
the single criteria of contractor evaluation indicating that
Turnkey was preferred when awarding contractors their 1) Financial Soundness
contracts.
The first category for which the relative importance index was
B. Reliability Results calculated was financial soundness. Each of the factors were
then calculated for relative important index (RII) and then
Reliability is a measure that analyzes if the items in a survey
ranked according to these values. Values of RII once rounded
questionnaire are reliable enough to provide consistent results
to two significant figures were then ranked many of which were
after respective testing in variable environments. The test is
ranked into the same value category. As seen in Table 8 ‘credit calculations a better idea can be made as to which of the
worthiness’ of a contractor was ranked as first based on variables in the category are considered important.
respondent answers. The RII of credit worthiness was 0.86
making it the most important factor considered by clients and 4) Health and Safety
contractors when it came to contractor selection and bids The category of health and safety has become an important
evaluation. Rank number two was designated to ‘financial criteria set for selection of contractors. According to the
stability of contractor’ as the RII value produced was 0.84. literature review in chapter two, Banwell (1964) stated that
Lastly, rank three was designated to both ‘banking health and safety requirements in contractor selection have
arrangements and bonds’ and ‘satisfactory settlement of final become and imperative variable to analyze before choosing a
accounts on past projects’, with RII of 0.82 and 0.82 contractor during bid evaluation. The clients and consultants
respectively. Based on the RII values produced for financial studied in Pakistan provided their opinions with regard to this
stability, the most important factors considered for this category category (see table 11). The most important factor in selection
are 1st credit worthiness, 2nd financial stability of contractor, of contractor based in this category is OSHA incident rates
and 3rd belonging to bother banking arrangement and bond, and (accident rates) with an RII value of 0.823 ranking as 1st in
satisfactory settlement of final accounts and past projects. The terms of importance. The variables of health and safety
RII values produced for this category provided better insight to procedures were valued with an RII as 0.812 ranking as 2nd in
the descriptive statistics of participant responses. the set. Management safety accountability had an RII of 0.812
as well ranking as 2nd. Lastly, the variable of attention to site
2) Technical Ability welfare and safety produced a RII value of 0.797 that ranked as
3rd in the set.
The next category of the question went onto analyze the
opinions of respondents based on what they believed was to be 5) Reputation
of most importance for a contractor’s technical ability. Based
on the collection of answers obtained, the RII analysis took The last category analyzed for RII values was reputation of the
place to produce the following results in Table 9. The top three contractor. This category had five variables that needed to be
factors that respondents though were most important amongst analyzed for RII in order to understand the importance of the
the group were ‘proper planning’ which ranked at 1, plant and factors. Table 12 provides the results of the RII analysis. The
equipment holding ranked at 2, and quality assurance which variable ‘behavior with staff’ was considered to be the most
ranked at 3. Proper planning produced an RII of 0.868, plant and important in the set as it produced a RII value of 0.827 and
equipment holding produced an RII of 0.857, and quality ranked as 1st. Successive factors were ranked as 2nd. Table 12
assurance produced an RII of 0.828. It should be noted that with shows that past client contractor relationship, past failures
regards to past experience of contractors, the variable was (incomplete projects), and current reputation in market are
ranked 5th with an RII of 0.812 while compatibility of the ranked as 2nd, with RII values as 0.822, 0.817, and 0.815
project was ranked as 6th with an RII of 0.807. The findings respectively. The last criteria ranked as 3rd was length of time
related to technical ability add to the findings of the descriptive in business with a RII of 0.805.
statistics by providing better insight into what client and D.Severity Index Results
contractors believed to be important criteria to consider when
selecting contractors for a construction project. The findings In addition to the relative importance index ranking previous
from the descriptive statistics were very preliminary and did not discussion, many academics in the construction field laud the
provide the needed insights to understand the true importance application of a ‘Severity Index’ score that can be used analyze
of the factors that impacted the decision for contractor selection. responses based on their severity score to between understand
However, with the RII values produced it is evident that specific how respondents perceive their importance (Idrus et al., 2011).
factors were given more importance over others. To further the examination of the current study’s results, the
severity index was used to analyze the frequency of responses.
3) Management Capability Idrus et al. (2011) proposes the following equation that can be
used to determine severity of factors:
The third category that was analyzed for contractor selection
was management capabilities. It included give criteria [∑ a i × xi ]
Severity Index (I) = × 100%
specifications from which ‘transition plan’ was ranked as 1st [5 ∑ xi ]
have the most importance in the category with an RII value of
0.863. The next two variables as seen in Table 10 had ranked Where, xi is the variable that expresses the frequency for the
2nd, with ‘past performance and quality’ with an RII of 0.833, responses for i; in which i is one of the Likert scale responses
and ‘organization and management capabilities’ with an RII (i.e. 1, 2, 3, 4, 5). With the Severity Index, the researcher is able
value of 0.832. The third most ranked variable for contractor to prioritize the criteria in the study. The criteria with the highest
selection includes ‘methodology of managing sub-contractors’ severity index (5) are ranked as the top criteria, while those
with a RII value of 0.825. The descriptive statistics in section criteria holding the least severity index (%) are ranked at the
4.5 were unable to provide how important each of the factors bottom. This was accomplished by transforming the five-point
truly were for clients and consultants. However, with RII value Likert scale to relative importance indices for each of the
criteria in the category using the above equation and
recommendations from Idrus et al. (2011). The results of the assurance’. The management capability set had the top three
severity index have been documented in the Table 13. ranks allotted to: ‘transition plan’, ‘past performance and
quality’, ‘organization and management capabilities’, and
The Severity Index presented in Table 13 is further illustrated ‘methodology of managing sub-contractors’. According to
in Figure 3 which provides a visual understanding of the criteria Idrus et al. (2011) technical capacity was the third most
used in contractor selection based on preference of Pakistan important criteria with a severity index of 87.87%. The study
consultants and clients. According to the results of severity found that respondents perceived this requirement to be highly
index, proper planning is the top ranked criteria for contractor significant because clients use it to measure contractor’s
selection in Pakistan with a severity index value of 88.0%. technical ability which includes experience, plant, equipment
Proper planning is a criterion found under ‘technical ability’ in and staff based performances. This means that clients have the
which it ranked 0.868 on the RII index. The next two top ranked tendency to assess technical competency of a contractor by
factors for contractor selection was ‘creditworthiness’ with a focusing on technical expertise and physical assets (Diekmann,
severity index of 87% and ‘transition plan’ with a severity index 1981). The current study further broke down the concept of
of 87%. Both of these requirements were ranked 2nd in the technical ability to specific requirements that are found to be
newly formed index. Clients and consultants in Pakistan hold universal when assessing contractors for a construction project.
the open that both these requirements are equally important According to the current study, proper planning was the most
when it comes to contractor selection on bids evaluation. The important criteria for technical ability with an RII value of 0.868
3rd ranked requirement based on responses and the severity and ranking 1st in its category. Furthermore, when the severity
index is ‘plant and equipment holding’ with a value of 86%. index was used on all the variables, proper planning was ranked
1st with a severity index of 88%
V. DISCUSSION
According to Relative Importance Index (RII), the top criteria VI. CONCLUSION
for financial soundness category are: ‘creditworthiness’, With the drastically increasing clients’ and regulatory
‘financial stability of the contractor’, ‘banking arrangements agencies’ demands in the construction industry together with
and bonds’, and ‘satisfactory settlement of final accounts on high competition among contractors of the industry, make it
past projects’. Cristobal (2012) conducted a similar study in extremely imperative to implement effective management of
which criteria was analyzed for contractor selection based on construction projects. Contractors are known to play a key role
financial requirements that they must have. The study found that in successfully completing construction projects. Hence, it
the criteria of ‘financial stability of a contractor was the most becomes essential to pick the most competent contractor for a
important considered by individuals that evaluated bids. The construction project. Through the choice of a competent and
study conducted by El-Abbasy et al. (2013) also has results qualified contractor the probability of project success increases
similar to the current study’s interpretation of financial drastically as the contractor is able to achieve the objectives and
soundness in contractors. The study conducted by Idrus et al. goals laid out by clients while also maintaining constraints like
(2011) has found that financial capacity of a contractor was quality, cost, and time.
ranked as 2nd in their study based on the Malaysian
construction industry. The significance of financial soundness This paper investigated the actual criterion that is used by both
in terms of creditworthiness, financial stability, settlement of clients and consultants in Pakistan to select contractors during
payments, and banking arrangements was crucial for Pakistani the bids evaluation phase of construction project. It was found
clients and consultants. Idrus et al. (2011) finds that financial that proper planning, creditworthiness, transition plans, plant
capacity of a contractor is significant because it enables clients and equipment holding, financial stability and past performance
to obtain information regarding the overall financial position of and quality were the top most important criteria used by clients
the contractors. In today’s construction industry climate, clients and consultation for the selection of contractors. The decision
still aim for higher profit returns but are now more concerned of accepting a bid or its evaluation directly impacts the
with the satisfaction from the products and services that are economic viability of a contractor. Hence, it is not
offered from contractors. Topcu (2004) argued that due recommended to make that decision solely on the basis of
diligence checks aimed at assessing the financial capacity of intuition of experience. To avoid losses and make the bidding
contractors to fulfill their contractual obligations is a best process more transparent potential evaluators of bids should
practice in risk management towards the entire construction analyze acceptable solutions using reliable methods and
project. Warszawki (1996) asserted that a contractor’s financial credible input. The approach proposed in the current research
strength adds to their overall credibility and reputation which may enable contract awarding bodies to place in-house
impacts the perceptions of clients and suppliers. The current procedures and managerial decision support system that will aid
study’s severity index also pointed to creditworthiness holding in the bid evaluation process.
a rank 2 with a severity index value of 87%. The respondents of
the current study also found financial stability to be important VII. THEORETICAL AND MANAGERIAL IMPLICATIONS
as it ranked four on the severity index with 86%. Evident from the discussion taken place, the construction
Technical ability category produced the top three ranks of: industry in Pakistan is negatively impacted by poor
‘proper planning’, ‘plant and equipment holding’, and ‘quality performance in terms of construction project delivery. A
majority of construction projects in Pakistan are not completed
in time and within the allocated resources or budget. Cost and [8] Biruk, S., Jaskowski, P., and Czarnigowska, A. (2017). Modelling
time overruns area major causes of project failure in Pakistan, contractors’ bidding decision. Engineering Management in Production
and Services, 9(1), pp. 64-73.
leading to disputes between clients and contractors. According
to preliminary review of the literature, a leading cause for these [9] Choi, M., Kim, J., and Kim, M. (2006). A Study on the Price Escalation
issues – cost and time overrun – is attributed to the poor System in a Construction Contract. KSCE Journal of Civil Engineering,
10(4), pg. 227-232.
selection methods implemented in choosing a contractor. By
analyzing the underlying causes attributed to this phenomenon, [10] Cristóbal, J. R. S. (2012). Contractor selection using multicriteria
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 Table 1- Main contractor selection criteria extracted from literature

Previous study

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Financial stability ■ ■
■ ■ ■ ■ ■ ■ ■ ■ ■

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Background of company
Technical capacity ■ ■ ■ ■ ■ ■ ■
■ ■ ■ ■ ■ ■ ■ ■
Cost
■ ■ ■ ■ ■ ■ ■ ■
Performance
■ ■ ■ ■ ■ ■ ■ ■ ■
Standard of quality
■ ■ ■ ■ ■ ■ ■ ■ ■
Occupational health and safety
■ ■ ■ ■ ■ ■ ■ ■ ■
Time performance
■ ■ ■ ■
Management capability
■ ■
Failed contract
■ ■ ■ ■ ■ ■
Progress of work
■ ■ ■ ■ ■
Human resource management
■ ■ ■ ■ ■
Level of technology
■ ■ ■ ■ ■ ■ ■ ■
Relationship with client
■ ■ ■ ■
Relationship with sub-contractors
■
Fraudulent activity
■ ■ ■ ■ ■
Competitiveness
Table 2- Respondent Demographics (Source; Questionnaire Data)

No of Questionnaires No of Questionnaires
Respondents Issued Returned Percentage
Clients 100 87 43.50

Consultants 100 32 16.00

Total 200 119 59.50

Figure 1- Respondent Organization's Experience

 Figure 2- Respondent Individual Experience

Table 3- Awarding of Procurement types to Contractors based on the experience of Respondents

Procurement Contract
Traditional Design and
Contract Build Turnkey Total
Individual Experience 6-10 years 4 8 0 12
11-15 years 6 8 0 14
16-20 years 49 12 32 93
Total 59 28 32 119

Table 4- Comparison of Method of Evaluation with Procurement Contract

Count
Procurement Contract
Traditional Design and
Contract Build Turnkey Total
Method of Evaluation Single criteria 18 8 32 58
Multi-criteria 41 20 0 61
Total 59 28 32 119

Table 5- Cronbach's Alpha Results for Contractor Criteria Importance Questions

Reliability Statistics
Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items
.855 .856 28
Table 6- Cronbach's Alpha Results for Remaining Questions

Reliability Statistics
Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items
.845 .889 14
Table 7- K-S Test Results for Normality of Data

Tests of Normality
Kolmogorov-
Main Categories Factors Smirnova Shapiro-Wilk
Statistic df Sig. Statistic df Sig.
Financial Stability .265 118 .200 .788 118 .700
Estimated Costs .297 118 .412 .821 118 .500
Banking Arrangements .361 118 .201 .734 118 .400
Financial Soundness
Satisfactory Settlement .261 118 .070 .802 118 .900
Creditworthiness .300 118 .502 .764 118 .820
Salary Satisfaction .298 118 .409 .787 118 .500
Past Experience .228 118 .080 .806 118 .440
Plant and Equipment Holding .299 118 .220 .767 118 .700
Permanent Work Force .253 118 .060 .803 118 .900
Compatibility With Project .292 118 .510 .792 118 .600
Technical Ability
Quality Assurance .241 118 .020 .798 118 .440
Labor Force Retention .307 118 .330 .780 118 .120
Proper Planning .299 118 .050 .754 118 .500
Methods Of Execution .250 118 .030 .821 118 .400
Past Performance and Quality .250 118 .800 .794 118 .600
Organization And Mgmt. .261 118 .030 .792 118 .200
Capabilities
Management
Methodology Of Managing Sub- .322 118 .200 .772 118 .360
Capabilities
Contractors
Risk Mgmt. .227 118 .700 .803 118 .270
Transition Plan .297 118 .700 .763 118 .090
Attn. To Site And Welfare and .278 118 .540 .816 118 .580
Safety
Health and Safety Health and Safety Procedures .406 118 .080 .661 118 .430
Accident Rates .332 118 .420 .763 118 .370
Mgmt. Safety Accountability .279 118 .603 .798 118 .420
Length Of Time In Business .324 118 .070 .769 118 .050
Past Failures .296 118 .095 .786 118 .090
Reputation
Past Client-Contractor .311 118 .082 .778 118 .300
Relationship
 Current Reputation .267 118 .300 .800 118 .070
Behavior With Staff .286 118 .900 .796 118 .820
a. Lilliefors Significance Correction
Table 8- RII Results for Financial Soundness Criteria

S/No Question Factor RII Rank

1 FS5 Credit Worthiness 0.86 1
2 FS1 Financial Stability of Contractor 0.84 2
3 FS3 Banking Arrangements and Bonds 0.82 3
4 FS4 Satisfactory Settlement of Final Accounts on Past Projects 0.82 3
5 FS2 Estimated Cost of Project/Tender Price 0.79 4
6 FS6 Employee's Satisfaction in Terms of Monthly Pay 0.79 4
Table 9- RII Results for Technical Ability Criteria

S/No Question Factor RII Rank

1 TA7 Proper planning 0.868 1
2 TA2 Plant and Equipment Holding 0.857 2
3 TA5 Quality Assurance 0.828 3
4 TA6 Labor Force Retention 0.823 4
5 TA3 Permanent Work Force (Staff) 0.817 4
6 TA8 Methods for Execution 0.817 4
7 TA1 Past Experience 0.812 5
8 TA4 Compatibility with the Project 0.807 6

Table 10- RII Results for Management Capability Criteria

S/No Question Factor RII Rank

1 MC5 Transition Plan 0.863 1
2 MC1 Past Performance and Quality 0.833 2
3 MC2 Organization and Management Capabilities 0.832 2
4 MC3 Methodology of Managing Sub-Contractors 0.825 3
5 MC4 Risk Management 0.820 4

Table 1- RII Results for Health and Safety Criteria

S/No Question Factor RII Rank

1 HS3 OSHA Incident Rates (Accident Rates) 0.823 1
2 HS2 Health and Safety Procedures 0.812 2
3 HS4 Management Safety Accountability 0.812 2
4 HS1 Attention to Site Welfare and Safety 0.797 3

Table 2- RII Results for Reputation Criteria

S/No Question Factor RII Rank

1 R5 Behavior with Staff 0.827 1
2 R3 Past Client Contractor Relationship 0.822 2
3 R2 Past Failures (Incomplete Projects) 0.817 2
4 R4 Current Reputation in Market 0.815 2
5 R1 Length of Time in Business 0.805 3
Table 3- Severity Index and ranking of criteria for selecting contractor for all 119 respondents.

Criteria for Selecting Main × 1 × × × ×

Contractor
( × ) 5 ( ) Severity Index (% ) Rank
Proper Planning 0 0 30 216 275 521 595 88 1
Creditworthiness 0 0 45 188 285 518 595 87 2
Transition Plan 0 0 39 204 275 518 595 87 2
Plant & Equipment Holding 0 0 54 180 280 514 595 86 3
Financial Stability 0 0 66 188 250 504 595 85 4
Past Performance & Quality 0 0 57 228 215 500 595 84 5
Organizationa and Mgmt.
0 0 57 232 210 499 595 84 5
Capabilities
Quality Assurance 0 0 72 200 225 497 595 84 5
Behavior with Staff 0 2 45 264 185 496 595 83 6
Methodology of Managing
0 2 36 292 165 495 595 83 6
Sub-contractors
Past Failures 0 0 51 264 180 495 595 83 6
Banking Arrangements 0 0 33 316 145 494 595 83 6
Labor Force Retention 0 0 48 276 170 494 595 83 6
Accident Rates 0 0 42 292 160 494 595 83 6
Past Client-Contractor
0 0 48 280 165 493 595 83 6
Relationship
Risk Mgmt. 0 0 78 204 210 492 595 83 6
Salary Satisfaction 0 0 54 272 165 491 595 83 6
Permanent Workforce 0 0 69 236 185 490 595 82 7
Methods of Execution 0 4 60 236 190 490 595 82 7
Current Reputation 0 0 66 248 175 489 595 82 7
Satisfactory Settlement 0 0 72 240 175 487 595 82 7
Past Experience 0 0 81 216 190 487 595 82 7
Health & Safety Procedures 0 0 27 360 100 487 595 82 7
Mgmt. Safety Accountability 0 0 66 256 165 487 595 82 7
Compatibility with Project 0 0 66 268 150 484 595 81 8
Length of Time in Business 0 0 57 296 130 483 595 81 8
Attn. to Site and Welfare &
0 2 72 264 140 478 595 80 9
Safety
Estimated Costs 0 8 60 268 140 476 595 80 9
 CRITERIA FOR SELECTION OF A CONTRACTOR IN PAKISTAN
Severity Index (%)

Estimated Costs 80
Attn. to Site and Welfare & Safety 80
Length of Time in Business 81
Compatibility with Project 81
Mgmt. Safety Accountability 82
Health & Safety Procedures 82
Past Experience 82
Satisfactory Settlement 82
Current Reputation 82
Methods of Execution 82
Permanent Workforce 82
Salary Satisfaction 83
Risk Mgmt. 83
Past Client-Contractor Relationship 83
Accident Rates 83
Labor Force Retention 83
Banking Arrangements 83
Past Failures 83
Methodology of Managing Sub-contractors 83
Behavior with Staff 83
Quality Assurance 84
Organizationa and Mgmt. Capabilities 84
Past Performance & Quality 84
Financial Stability 85
Plant & Equipment Holding 86
Transition Plan 87
Creditworthiness 87
Proper Planning 88

Figure 3- Severity index (%) of criteria for selection of a contractor in Pakistan