MODEL ANALYSIS OF THE THRESHOLD PRICE OF PUBLIC CONSTRUCTION -A STUDY TO IMPROVE COST ESTIMATION SYSTEM-

Satoru Yamaki¹ and Nobuyoshi Yabuki²

1) Senior Researcher, System Service Division Cost Estimation System Center, Japan Construction Information Center, Tokyo, Japan.
2) Ph. D. Prof. Division of Sustainable Energy and Environment Engineering, Graduate School of Engineering, Osaka University, Osaka, Japan.

Abstract: In Japan, when government and local agencies order public works, contract offices are mandated to set planning threshold prices, which are the upper limit of the bidding prices. A planning threshold price consists of “Construction price” and “Consumption tax”. The “Construction price” is the sum of “Construction prime costs” and “General and Administrative expenses”. In addition, “Construction prime cost” is the total of “Direct cost of construction” and “Indirect cost of construction. “ “Direct cost of construction” is amount necessary to perform the work, such as labor cost, machine expenses and materials cost. As a result, the planning threshold price does not reflect the decision making factors by the corporate strategy of the bidding company. To calculate the threshold price from the bidding company standing point, we formulated the relations between the bidding company's construction cost and the planning threshold price. Specifically, we quantitatively identified the relationship between the distribution of the construction costs and the planning threshold prices, by building a model based on the auction theory. The model calculates the planning threshold price based on an estimated cost of the bidding company.

Keywords: Public procurement, Threshold price, Game theory, Auction theory

Bibliographical Reference:
Satoru Yamaki and Nobuyoshi Yabuki. “MODEL ANALYSIS OF THE THRESHOLD PRICE OF PUBLIC CONSTRUCTION -A STUDY TO IMPROVE COST ESTIMATION SYSTEM.” In Proceedings of International Conference on Civil and Building Engineering Informatics (ICCBEI 2015), 84. Tokyo, Japan, 2015.

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