Avoiding price risk and the winner’s curse in competitive bidding
As the true cost of construction and hard/soft infrastructure delivery is not known until the completion of a project, contractor selection and the risk of selecting a winning bidder that has underestimated the cost of the contract is a major concern in procurement. This can lead to the winner’s curse, a term that refers to the difference between the lowest and second lowest bid, and the consequences of the bid price being too low to cover the costs including a reasonable return. In this blog we discuss ways to reduce price risk in bidding.
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