Factors Affecting Contractors’ Bidding Decisions for Construction Projects in Saudi Arabia
Factors Affecting Contractors’ Bidding Decisions for Construction Projects in Saudi Arabia
Alsaedi, Mohammad;Assaf, Sadi;Hassanain, Mohammad A.;Abdallah, Abdullatif
buildings Article Factors Affecting Contractors’ Bidding Decisions for Construction Projects in Saudi Arabia 1 1 2 , 3 Mohammad Alsaedi , Sadi Assaf , Mohammad A. Hassanain * and Abdullatif Abdallah Construction Engineering and Management Department, King Fahd University of Petroleum and Minerals, Dhahran 31261, Saudi Arabia; email@example.com (M.A.); firstname.lastname@example.org (S.A.) Architectural Engineering Department, King Fahd University of Petroleum and Minerals, Dhahran 31261, Saudi Arabia Department of Management and Marketing, King Fahd University of Petroleum and Minerals, Dhahran 31261, Saudi Arabia; email@example.com * Correspondence: firstname.lastname@example.org; Tel.: +966-13-860-3283 Received: 26 November 2018; Accepted: 23 January 2019; Published: 29 January 2019 Abstract: One of the critical decisions taken by contractors is whether or not to bid for a project. This is due to the complexity and uncertainty surrounding this decision, which is inﬂuenced by many factors. Given the above challenge, this study aimed to uncover the critical factors affecting the contractors’ bidding decisions in Saudi Arabia-based construction projects. A questionnaire survey, which consisted of 31 factors, was distributed to ﬁrst-, second- and third-grade contractors. In total, 67 responses were obtained. Median and relative importance index (RII) techniques were adopted for ranking the most critical factors. Based on the received responses, the top six critical factors were “size of the job”, “type of the job”, “company’s strength in the industry”, “designer/design quality”, “rate of return”, and “project cash ﬂow”. The least signiﬁcant factors were “job start time” and “labor environment (union/nonunion/cooperative)”. The ﬁndings of this study show a level of agreement among all contractors about the critical factors. The ﬁndings would beneﬁt contractors and subcontractors by increasing their understanding of the major factors affecting the bidding decision process. Contractors armed with such valuable information will be better able to enhance their bidding decision-making process in terms of efﬁciency and effectiveness. Keywords: bidding decision; contractors; Saudi Arabia; construction industry; factors 1. Introduction A contractor can secure a job in two possible ways. There is direct negotiation with either the client, or the client’s representative, and there is bidding . The bidding decision is a vital activity that contractors have to engage in, on a regular basis . Assuming a decision is made to bid, the process of preparing a bid package demands considerable time and resources . Owing to this fact, contractors have to weigh the beneﬁts and costs of preparing a bid. The bidding process is highly complex and unsystematic, requiring numerous factors to be considered simultaneously [3–6]. Factors may be internal or external  and may pertain to the unique features of a project and the dynamic changing nature of construction . Added to this already complex situation is the fact that these factors have a high degree of complicated interrelations . In addition, considering these factors in a limited time period presents another constraint . This makes the process of considering all these factors practically impossible for the decision maker . Nevertheless, the bidding decision can have signiﬁcant impact on the daily operation as well as the long-term performance of a contractor . The bidding decision, which is the ﬁrst step in undertaking a project, constitutes a strategic decision for any construction company . This decision plays a determining role in both the survival and Buildings 2019, 9, 33; doi:10.3390/buildings9020033 www.mdpi.com/journal/buildings Buildings 2019, 9, 33 2 of 13 prosperity of the contractor . Given the high number of competitors nowadays, the successful execution of the bidding process is very crucial. In developing countries, many medium and small construction companies discontinue within the initial ﬁve years of their establishment . In Saudi Arabia, it is customary for each contractor to obtain a classiﬁcation certiﬁcate, depending on size of contractor, which is mandatory for bidding on governmental projects. One of the primary purposes for the enforcement of the classiﬁcation system is to ensure that contractors bid for projects that match their capacities . Usually, the bidding process entails two important decisions, namely, the decision to bid, and bid price determination . The ﬁrst decision, whether or not the contractor wants to bid for a speciﬁc project, presents the contractor with a dilemma. In particular, a decision of not to bid might translate to an opportunity loss. This opportunity loss could be in the form of failing to leverage the chance to generate proﬁt, enhance the contractor ’s position in the industry, and establish a working relationship with the client, among other opportunities . On the other hand, a decision to bid will require the contractor to prepare estimates for the direct and indirect costs associated with the project . If the contractor bids for an inappropriate project, signiﬁcant ﬁnancial losses could follow which may, in the worst case, lead to a discontinuation of the contractor . The second decision is the determination of the bid price. For example, in the cost plus markup pricing, the contractor prepares the estimate for the direct and indirect cost of the labor, materials, and equipment that will be used in the project. Then, the contractor will add a percentage to cover contingency, ofﬁce overhead, and proﬁt [1,16]. The ﬁndings of this study will beneﬁt both the industry and the research community. With respect to the industry, contractors would gain an increased understanding of the major factors affecting the bidding decision process. Contractors in possession of this information will be better positioned to make more informed bidding decisions, taking into account the most critical factors. This should pave the way to a more efﬁcient and effective bidding process. In addition, this will further help them in selecting projects that match their capacities, leading to higher proﬁts and better performance, in addition to avoiding the possibility of losses from ill-advised decisions. With respect to the research community, the ﬁndings will provide valuable information for creating more realistic decision models, which consider the context and the size of the contractors as key variables. The objective of this study, therefore, is to identify and assess the main factors affecting contractors’ bidding decisions for construction projects in Saudi Arabia. 2. Research Methodology The research methodology adopted in this study consisted of the following activities: Reviewing previous studies to identify the main factors inﬂuencing contractors’ bid/no-bid decisions. Developing a questionnaire survey to assess the level of importance of the identiﬁed factors. The questionnaire survey consisted of two main sections. The ﬁrst section served to obtain general background information related to the respondents and their respective companies, such as position, years of working experience, educational qualiﬁcation background, number of employees, and size of projects. The second section, constituting the main part of the questionnaire survey, sought to obtain the respondent’s perception of the identiﬁed factors, with respect to the extent to which these factors inﬂuenced the bidding decision. The respondents were solicited to provide their evaluation of the factors. The questionnaire survey employed to evaluate the factors was a 5-point Likert scale, where 1 represents “insigniﬁcant” and 5 represents “extremely signiﬁcant”. Distributing the questionnaire survey to contractors based in the Eastern Province of Saudi Arabia. The sample population consisted of professionals working for contractors and subcontractors classiﬁed under ﬁrst, second and third grade. A total of 67 responses were obtained. Collecting and tabulating the responses to determine the relative importance index (RII) of these factors based on the ratings given by the contractors, and hence their ranking. Buildings 2019, 9, 33 3 of 13 Developing conclusions and providing recommendations based on the ﬁndings of the study. 3. Literature Review The literature abounds with previous studies that have addressed the topic of bidding strategies. Many of these studies have attempted to identify the main factors affecting the contractors’ bidding decisions. In Nigeria, Oyeyipo et al.  conducted a study to identify the main factors inﬂuencing contractors’ bidding decisions in construction projects. Based on the ﬁndings of the study, the most signiﬁcant factors affecting the bid/no-bid decision were “ﬁnancial capability of clients”, “availability of capital”, and “availability of material”. In the UK, Shash  conducted a study to identify the factors affecting the bidding and markup decisions of contractors. The study identiﬁed 55 factors affecting the decision maker throughout the bidding process. Of the 55 factors, three factors were ranked most signiﬁcant, namely, “the need for work”, “number of competitors tendering”, and “amount of experience on such projects”. Furthermore, it was observed that a majority of the contractors based their decision of bidding and markup size on subjective assessments. In the US, Ahmad and Minkarah  conducted a study that aimed to identify the factors affecting the contractors’ bidding decisions. The study identiﬁed 31 factors. It was concluded that the bidding process was greatly affected by subjective decisions such as “type of job”, “size of job”, “the need for work”, “owner”, “historic proﬁt”, “degree of hazard”, and “location”. However, despite the importance of “proﬁtability” and “competition”, they were not ranked among the top factors. In China, Chen et al.  looked at how a contractor ’s “risk perception and risk propensity” inﬂuenced the bidding decision. It was found that there existed a signiﬁcant negative relationship between “risk perception” of the decision maker and the decision to bid. On the other hand, there existed a signiﬁcant positive relationship between “risk propensity” of the decision maker and the decision to bid. “Risk perception and risk propensity” were affected by the decision makers’ past experiences in the outcome of their decisions. In Australia, Fayek et al.  conducted a questionnaire survey to investigate the bidding practices adopted by Australian contractors. The results of the survey showed that the ﬁve most important factors affecting the bidding decisions were “project type”, “availability of resources and people”, “experience”, “need for work”, and “location of project”. Further, based on the results, it was found that most of the bidding practices were subjective and relied on experienced-based judgment. Moreover, the assessment of competitors was always performed in an informal manner, without any objective references to historical data. In Canada, Fayek et al.  identiﬁed 118 factors affecting the bidding decision. These factors were grouped under 12 categories. In this study, the bidding decision comprised four elements of bidding, including “the decision to bid”, “the risk allowance”, “the opportunity allowance”, and “the markup size”. The ﬁndings of the study indicated that the ﬁve most signiﬁcant factors were “type of project”, “potential proﬁt from project”, “experience on similar projects”, “familiarity with market”, and “size of project”. In Saudi Arabia, Bageis and Fortune  found the most signiﬁcant factors inﬂuencing the bidding decision to be “the client ﬁnancial capacity”, “prompt payment habit of the client”, “the project payment system”, “clarity of the work and speciﬁcations”, and “project cash ﬂow”. In Qatar, Jarkas et al.  conducted a study that identiﬁed ten critical factors, including “previous experience with the employer”, “the need for work”, “current workload”, “past experience in similar projects”, “the size of project”, “reputation and identity of the employer in the industry”, “employer ﬁnancial stability”, “availability of other projects”, “the swiftness of the employer in the payment process”, and “the quality level of tender documents”. In Palestine, Enshassi et al.  investigated factors affecting the bidders’ decisions to bid or not. Overall, 78 factors were identiﬁed from a literature review. These factors were ranked according to their degree of impact on the contractors’ decisions. It was concluded that the most critical factors Buildings 2019, 9, 33 4 of 13 were “contractors’ ﬁnancial capability”, “owners’ ﬁnancial capability”, “the project values (ﬁnancial)”, “the due date of the payments”, “the availability of construction materials in local markets”, and “the stability of the construction industry”. Another study by Shokri-Ghasabeh and Chileshe  in Australia determined that the highly signiﬁcant factors inﬂuencing the bid/no-bid decision were “client ﬁnancial capability”, “project risk”, and “project future beneﬁts, proﬁtability, and number of competitors/bidders”. The least signiﬁcant factors, on the other hand, were “contractors’ ﬁnancial situation”, “project duration” and “contractors’ material availability”. On the basis of the above review of the literature it can be concluded that the critical factors affecting contractors’ bidding decisions in construction projects share similarities in several aspects, such as “the need for work”, “experience”, “location”, “type of job”, “size of job” and “location”. 4. Assessment of Factors Inﬂuencing Decision to Bid After in-depth review of the literature, the list of factors identiﬁed by Ahmed and Minkarah  was viewed to be both comprehensive and mostly covering the signiﬁcant factors identiﬁed in several of the reviewed previous studies. Therefore, it was the viewpoint of the authors that the factors presented in the above study were deemed to be suitable in the context of Saudi Arabia. Thus, the study adopted a set of 31 factors inﬂuencing the decision to bid from the questionnaire survey developed by Ahmad and Minkarah . These factors were grouped under four different groups, namely: “project characteristics”, “market characteristics”, “contractor characteristics”, and “owner/designer/labor characteristics”. These 31 factors were then included in a questionnaire survey that was distributed to practicing contractors, with different classiﬁcations in the Eastern Province of Saudi Arabia. In order to determine the rank of these factors based on ratings given by the contractors, the relative importance index (RII) technique was adopted [22–24]. The formula used to compute the RII for each factor is shown below: 5(n5) + 4(n4) + 3(n3) + 2(n2) + n1 RII(%) = 100 (1) 5N where n1, n2, n3, n4 and n5 denote the number of respondents who selected 1, representing “not important”; 2, representing “slightly important”; 3, representing “important”; 4, representing “highly important”; and 5, representing “extremely important”, respectively. N denotes the total number of responses received. 4.1. Sample Size The Saudi Arabian Ministry of Municipal and Rural Affairs (MOMRA)  maintains a detailed record of all contractors practicing in a given region of the Kingdom. This record contains valuable information such as contractor ﬁrms’ statuses, names, addresses, degrees of classiﬁcation and specialty. Recent records indicate that there are 400 registered contractors in the Eastern Province. The size of the sample was determined for contractors classiﬁed under the ﬁrst (contractors allowed to undertake building projects with maximum value exceeding 200 million SAR), second (contractors allowed to undertake building projects with maximum value ranging from more than 50 to 200 million SAR), and third (contractors allowed to undertake building projects with maximum value ranging from more than 15 to 50 million SAR) grades only. Based on the record from MOMRA, the number of contractors’ ﬁrms classiﬁed under the ﬁrst, second and third grades are 50, 41 and 77, respectively. This amounts to a total of 168 contractors. Employing the Kish formula [26,27], the appropriate sample size was computed to be 63 contractors. A total of 67 responses were obtained. Buildings 2019, 9, 33 5 of 13 4.2. Proﬁle of the Respondents The distribution of the respondents’ positions indicated that 22% occupied senior managerial positions. Thirty percent occupied engineering managerial positions. Another 30% occupied engineering positions. The remainder of the respondents occupied other positions. The distribution of the levels of education of the respondents indicated that 72% were holders of Bachelor of Science degrees, 25% were holders of higher degrees, and 3% of the respondents were holders of diplomas. The distribution of the respondents’ years of working experience indicated that 20.9% had less than 5 years of experience, 26.9% had between 5 and 10 years of experience, 20.9% had between 11 and 14 years of experience, 13.4% had between 15 and 20 years of experience, and 17.9% of the respondents had more than 20 years of experience. This distribution illustrates the reliability of the responses to the questionnaire survey, whereby the majority (52.2%) of the respondents have more than 10 years of working experience. The distribution of project types that the respondents were involved in indicated that 58% were involved in building construction projects, 19% were involved in infrastructure projects, 15% were involved in specialized industrial projects, and the remaining 8% were involved in other projects. 5. Findings and Discussion Table 1 presents the ranking of the 31 factors, arranged according to their respective categories. In addition, the rankings of the various grades of contractors are also presented in the same table. Table 2 presents the overall ranking of the factors arranged in descending order. The six most important factors according to the respondents were “size of the job”, “type of the job”, “company’s strength in the industry”, “designer/design quality”, “rate of return”, and “project cash ﬂow”. The last three factors had the same RII and were thus all ranked four. It is interesting to note that these factors primarily come under the project characteristics category. In other words, the most important factors inﬂuencing the contractors’ bidding decisions, regardless of size, are related to the project characteristics. The ﬁndings of this study to some extent agree with that of Fayek et al. , in Australia, where it was found that “project type” (corresponding to “type of the job”), “availability of resources and people” (corresponding to “type and number of laborers”), “need for work”, and “location of project” (corresponding to “location of the project”) were signiﬁcant. In the present study, “type of the job” was ranked second, in line with this previous study. “Type and number of laborers”, “need for work”, and “location of the project”, on the other hand, were ranked twentieth, twelfth and twenty-ﬁfth, respectively. The ﬁndings concur with those of Fayek et al. , where “type of project” (corresponding to “type of the job”), “potential proﬁt from project” (corresponding to “rate of return”), and “experience on similar projects” (corresponding to “company’s strength in the industry”) were among the most signiﬁcant factors. These ﬁndings also agree with a similar study in Saudi Arabia conducted by Bageis and Fortune . In particular, “clarity of the work and speciﬁcations” (corresponding to “designer/design quality”) and “project cash ﬂow” (corresponding to “project cash ﬂow”) were two signiﬁcant factors. The overall ﬁndings of the present study differ from the ﬁndings of Oyeyipo et al. , conducted in Nigeria, where “availability of capital” was among the most signiﬁcant factors. By contrast, this factor was ranked nineteenth in the present study. It appears that since Saudi Arabia is a more developed nation, coupled with the relatively large-size contractors who participated in the present study, capital does not represent a signiﬁcant impediment. The results also disagree with that of Shash , in the UK, where “the need for work” (corresponding to “need for work”) and “number of competitors tendering” (corresponding to “competition”) were the most signiﬁcant factors. Conversely, the present study found these factors to be ranked twelfth and seventh, respectively. The ﬁndings, although agreeing with two of the signiﬁcant factors, are largely opposed to those of Ahmad and Minkarah , in the US. In particular, it was revealed that the major factors inﬂuencing the bidding process were “type of job”, “size of job”, “the need for work”, “owner”, “historic proﬁt”, “degree of hazard”, and “location”. The present study agreed with the ﬁrst two factors Buildings 2019, 9, 33 6 of 13 ranking them second and ﬁrst, respectively. However, the remaining factors were ranked twelfth, twenty-third, twelfth, twenty-second and twenty-ﬁfth, respectively. On the basis of the ranking, the least signiﬁcant factors were “job-related contingency”, “portion of the work to be subcontracted”, “tax liabilities”, “job start time”, and “labor environment (union/nonunion/cooperative)”. For “job-related contingency”, since contingency cost is estimated as a percentage of the overall project cost, and is thus not subject to variation/uncertainty, it is not expected to impact contractors’ decisions to bid. With respect to “portion of the work to be subcontracted”, it is common practice for contractors to subcontract specialized portions of the project to subcontractors. However, despite the prevalence of the practice, subcontracting has minimal impact on the contractors’ decision to bid. There are two possible explanations for this situation. Firstly, because there are a limited number of well-known subcontractors for performing specialized work in the market, in many cases clients will suggest a short list of subcontractors to select from. Secondly, contractors receive quotations from prospective subcontractors prior to bidding. Thus, in these cases contractors possess information relating to how much expenses will be allocated for reimbursing subcontractors. This cost will then be factored into the bid. In relation to “tax liabilities”, because the value of tax liabilities is ﬁxed, contractors are able to consider this ﬁgure and factor it into their bids. In terms of “job start time”, if the start time of a project does not affect the duration of the project, it will not have an impact on the estimated cost of the project and will therefore not affect the decision to bid. This is because all associated costs largely depend on the duration of the project and not the starting time. For example, rent, heavy equipment and manpower costs are a function of the project’s duration. Finally, “labor environment” appeared as the least signiﬁcant factor possibly because labor unions are not effective. As a result, contractors will not assign much weight to this factor. It can be concluded from the above results that contractors’ decisions to bid or not to bid are strongly inﬂuenced by the degree of cost uncertainty. The more uncertainty surrounding the determination of a project’s cost, the more likely it will affect the contractors’ decision to bid. Buildings 2019, 9, 33 7 of 13 Table 1. Overall, third-grade, second-grade and ﬁrst-grade contractors: RII and rank of factors affecting bidding decisions. Third-Grade Second-Grade First-Grade Overall Contractor Contractor Contractor Factors Affect Bidding Decision No. (N = 67) (N = 26) (N = 10) (N = 31) RII Rank RII Rank RII Rank RII Rank Project Characteristics 1. Size of the job 78.8 1 80.8 2 82 1 76.1 6 2. Type of the job 77.3 2 81.5 1 68 10 76.8 3 3. Location of the project 64.5 25 66.9 17 60 19 63.9 26 4. Duration 69.9 12 71.5 8 74 5 67.1 22 5. Historic proﬁt on similar jobs 69.9 12 71.5 8 60 19 71.6 14 6. Job start time 60.6 30 56.154 31 64 15 63.2 27 7. Degree of difﬁculty 71.9 8 73.1 5 62 17 73.5 11 8. Degree of hazards 66 22 67.7 14 52 26 69 19 9. Project cash ﬂow 73.1 4 72.3 6 70 7 74.8 9 10. Rate of return 73.1 4 65.4 21 82 1 76.8 3 Market Characteristics 11. Competition 72.5 7 72.3 6 68 10 74.2 10 12. Overall economy (availability of work) 70.1 11 62.3 28 70 7 76.8 3 13. Time of bidding (season) 69 18 65.4 21 64 15 73.5 11 14. Risk involved in the investment 71.6 9 63.8 25 78 3 76.1 6 15. Tax liabilities 60.9 29 61.5 29 60 19 60.6 29 Buildings 2019, 9, 33 8 of 13 Table 1. Cont. Third-Grade Second-Grade First-Grade Overall Contractor Contractor Contractor Factors Affect Bidding Decision No. (N = 67) (N = 26) (N = 10) (N = 31) RII Rank RII Rank RII Rank RII Rank Contractor Characteristics 16. Need for work 69.9 12 66.9 17 52 26 78.1 2 17. Current workload 69.3 17 66.9 17 56 25 75.5 8 18. Conﬁdence in your workforce 71.6 9 73.8 4 66 13 71.6 14 19. Type and number of supervisory persons required/available 64.8 24 65.4 21 50 29 69 19 20. Type and number of laborers 66.6 20 71.5 8 52 26 67.1 22 21. Type and number of equipment required/available 63.9 26 67.7 14 46 31 66.5 25 22. Portion of the work to be subcontracted 61.5 28 63.1 27 60 19 60.6 29 23. Reliability of subcontractors 69.9 12 69.2 12 66 13 71.6 14 24. Company’s strength in the industry 77 3 71.5 8 76 4 81.9 1 25. General (ofﬁce) overhead 66.6 20 67.7 14 58 24 68.4 21 26. Uncertainty of the estimate 69.9 12 68.5 13 72 6 70.3 17 27. Capital requirement/availability 67.5 19 64.6 24 68 10 69.7 18 28. Job-related contingency 63.6 27 66.2 20 60 19 62.6 28 Owner/designer/labor Characteristics 29. Previous experience with owner 65.1 23 63.8 25 62 17 67.1 22 30. Designer/design quality 73.1 4 74.6 3 70 7 72.9 13 31. Labor environment (union/nonunion/cooperative) 57.3 31 57.7 30 48 30 60 31 Note: RII: relative importance index. Buildings 2019, 9, 33 9 of 13 Table 2. Factors arranged according to their respective ranks. No. Factor RII OR (N = 67) 1 Size of the job 78.8 1 2 Type of the job 77.3 2 24 Company’s strength in the industry 77 3 9 Project cash ﬂow 73.1 4 10 Rate of return 73.1 4 30 Designer/design quality 73.1 4 11 Competition 72.5 7 7 Degree of difﬁculty 71.9 8 14 Risk involved in the investment 71.6 9 18 Conﬁdence in the workforce 71.6 9 12 Overall economy (availability of work) 70.1 11 4 Duration 69.9 12 5 Historic proﬁt on similar jobs 69.9 12 16 Need for work 69.9 12 23 Reliability of subcontractors 69.9 12 26 Uncertainty of the estimate 69.9 12 17 Current workload 69.3 17 13 Time of bidding (season) 69 18 27 Capital requirement/availability 67.5 19 20 Type and number of laborers 66.6 20 25 General (ofﬁce) overhead 66.6 20 8 Degree of hazards 66 22 29 Previous experience with owner 65.1 23 19 Type and number of supervisory persons required/available 64.8 24 3 Location of the project 64.5 25 21 Type and number of equipment required/available 63.9 26 28 Job-related contingency 63.6 27 22 Portion of the work to be subcontracted 61.5 28 15 Tax liabilities 60.9 29 6 Job start time 60.6 30 31 Labor environment (union/nonunion/cooperative) 57.3 31 Note: RII: relative importance index; OR: overall ranking. Buildings 2019, 9, 33 10 of 13 With respect to the assessment of the factors based on contractor size, for the third-grade contractors, the factor “type of the job” was the most important, with an RII of 81.53. A possible explanation for this result might be because third-grade contractors are less ﬂexible in selecting work as they are highly specialized. In addition, based on the classiﬁcation system, these contractors are restricted from bidding for projects that exceed a certain value. Thus, the type of work becomes a major inﬂuence in the decision to bid. For the second-grade contractors, the factors “size of the job” and “rate of return” were most important, with an RII of 82. It is likely that second-grade contractors assign a high priority to expanding their business, and thus focus more on the capacity of a project to generate a healthy income. Finally, for the ﬁrst-grade contractors, the factor “company’s strength in the industry” was the most important, with an RII of 81.94. This seems to suggest that as contractors grow, their expertise in the industry becomes a decisive factor in their decision to bid. Furthermore, these contractors may be concerned with maintaining their classiﬁcation status, which among other factors, depends on the number of completed and ongoing projects . Table 3 presents the RII values of the four categories. For the third-grade contractors, the category “contractor characteristics” was found to be the most important category inﬂuencing the contractors’ bidding decisions. This indicates that third-grade contractors are highly sensitive to internal factors. This could be attributed to their limited capital, resources, and lack of experience in the market. This also supports the previous observation where it was noted that the type of job was a principal factor in their decision to bid. More speciﬁcally, because these contractors have many internal constraints, the type of job greatly affects their decision to bid. The ﬁndings agree with those of Ma , where “experience and familiarity of your ﬁrm with this speciﬁc type of work” and “current ﬁnancial situation of the company” were among the most important factors reported by third-grade contractors. On the other hand, for both the second-grade and ﬁrst-grade contractors, the category “market characteristics” was found to be the most important category inﬂuencing the contractors’ bidding decisions. Once a contractor has become established, internal factors become relatively less important in comparison to external factors, such as the economy and competition. Table 3. Overall, third-grade, second-grade and ﬁrst-grade contractors’ RII values and ranks of categories affecting bidding decisions. Third-Grade Second-Grade First-Grade Overall Contractor Contractor Contractor Category Affecting Bidding Decision RII Rank RII Rank RII Rank RII Rank Project Characteristics 70.51 1 65.077 3 61 2 64.97 4 Market Characteristics 68.84 2 65.077 3 68 1 72.26 1 Contractor Characteristics 67.83 3 67.93 1 60.15 3 70.22 2 Owner/designer/labor Characteristics 65.17 4 65.38 2 60 4 66.67 3 Note: RII: relative importance index. 6. Test of Agreement The rankings of the factors by the different contractor grades were tested for agreement using the Spearman’s rank correlation coefﬁcient (r ). The Spearman rank correlation coefﬁcient (r ) was s s computed by using the following formula: r = 1 (2) n(n 1) where r denotes the Spearman’s rank correlation coefﬁcient; d denotes rank difference between the two variables for each factor; and n denotes the total number of factors in one set of variables (31 factors in this case). The Spearman rank correlation coefﬁcient value ranges from 1 to +1, representing strong disagreement and strong agreement, respectively. Buildings 2019, 9, 33 11 of 13 The test yielded a 57% correlation between second- and ﬁrst-grade contractors, 42% correlation between third- and ﬁrst-grade contractors, and 30% correlation between third- and second-grade contractors. Although the result of this test indicates a positive correlation among all parties, the correlation was not strong, with the highest score being 57%. Nevertheless, the results show a level of agreement among the different grades of contactors in terms of the ranking of the most important factors affecting the bidding decision. 7. Conclusions and Recommendations In conclusion, the factors affecting the contractors’ bidding decisions for construction projects in Saudi Arabia were investigated, taking the Eastern Province as a case study. 31 factors were identiﬁed from a review of the literature in this ﬁeld. These factors were categorized into four main groups, namely, “project characteristics”, “market characteristics”, “contractor characteristics”, and “owner/designer/labor characteristics”. The questionnaire survey was answered by 67 respondents, working in contractor organizations in the Eastern Province of Saudi Arabia. The results indicated that the top six most important factors were: “size of the job”, “type of the job”, “company’s strength in the industry”, “designer/design quality”, “rate of return”, and “project cash ﬂow”. The latter three factors received equal weights (i.e., 73.1%) and were thus all ranked four, explaining the appearance of six factors as the top ﬁve factors. The most important factor for each grade of contractors was determined. Among the four main groups under which the factors are categorized, the respondents identiﬁed that the “project characteristics” group of factors was the most important group, followed by “market characteristics”, “contractor characteristics”, and “owner/designer/labor characteristics” groups, respectively. The Spearman’s rank correlation coefﬁcient indicated a positive correlation among all parties. The largest agreement (57%) was between second- and ﬁrst-grade contractors. The lowest agreement (30%) was between third- and second-grade contractors. The study recommends the following measures to improve the bidding process: Among the ﬁve most important factors identiﬁed by the respondents, a majority of them belonged to the “project characteristics” category. Some of the contractors who participated in the study recommended allocating adequate time for examining the project characteristics before a decision is made to bid for a particular project. Such characteristics should cover the type, size, and difﬁculty of the project. These aspects should be measured against the company’s capability and area of specialty. Adopting such a practice would ensure that more projects undertaken by the contractors are successful. One of the top ﬁve most important factors was “designer/design quality”, which was ranked ﬁfth. One way of tackling this issue is through increasing the awareness of the signiﬁcance of applying the constructability concept. This can be achieved through selecting a project delivery method, which integrates the design and contractor team. Examples of project delivery methods that foster this integration include design–build–operate–transfer (DBOT); design–build (DB); and engineering, procurement and construction (EPC). This will facilitate the early involvement of the contractors during the design stage. The value of this approach is that it allows the incorporation of the contractor ’s construction experience at an early stage of the project. This should lead to better design quality [29,30]. Some of the respondents suggested adding other factors to be investigated in future studies, such as “progress payments”, “clear information and details about project”, “speciﬁcations required and weather conditions”, “involvement of all departments of companies”, “current market conditions” and “contractor ’s previous experience with other competitors and other projects”. The ﬁndings of this study would increase the knowledge of contractors to understand the factors affecting bidding decisions in several ways. By improving their bidding decision process, Buildings 2019, 9, 33 12 of 13 the contractors’ effectiveness will be enhanced. In addition, this will further aid them in selecting the appropriate project, resulting in better performance and higher proﬁts. 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