Assessing the cost of competitive tendering in Ghana using transaction cost theory

Abstract

PurposeThe purpose of this study was to determine the transaction cost (TC) contractors incur when tendering for a project as well as establish a correlation between the TC of tender and tender amount of projects procured through the national competitive bidding procurement method.Design/methodology/approachThe research draws extensively documentary analysis, observation and interviews to collect cost data on 14 different tenders submitted by a D1/K1 contractor. Using TC theory, the data are analyzed and the actual cost is determined. Further, Spearman rank correlation is employed to establish a relationship between tender price (TP) and the cost of tender by the aid of Statistical Package for Social Sciences.FindingsThe research developed a tender preparation conceptual framework highlighting the components of TC in competitive tendering in Ghana and also revealed that, apart from the emotional and psychological costs, contractors in Ghana incur approximately Gh₵ 4,625 (US$ 925)–Gh₵ 2,520 (US$ 504) to prepare and submit a competitive tender. In relation to the tender figure, the TC of tender in Ghana ranges from 0.05% to 0.65% and an average of 0.33%. Also, there is an inverse correlation between TP and the percentage cost of tender.Research limitations/implicationsThe research relied on 14 competitive tenders and also limited to public sector works. Findings from the study should therefore be applied with caution.Originality/valueThis study is the only known research that has focused on assessing the TC of public sector competitive tendering from a contractor's perspective and within a developing sub-Saharan African context.

Professional skills development: foundational curriculum skills and competencies of UK construction management programmes

“…Spearman's Rank Correlation Coefficient (R s ) Test is a non-parametric test used to ascertain the strength of relationship between two sets of variables (Tanner, 2012; Allen, 2017) using the following formula described in Equation (1).Where: R s = Spearman's rank correlation coefficient; d = difference between the two ranks of each observation; and n = number of observations. Spearman's Rank Correlation Coefficient Test is an established research method within built environment literature and has been used to: help determine the incurred transaction code of project tenders procured via competitive bidding (Ameyaw et al. , 2021); evaluate the key performance indicators for commercial building renovations and fit-outs (Ho et al.…”

“…Where: R s 5 Spearman's rank correlation coefficient; d 5 difference between the two ranks of each observation; and n 5 number of observations. Spearman's Rank Correlation Coefficient Test is an established research method within built environment literature and has been used to: help determine the incurred transaction code of project tenders procured via competitive bidding (Ameyaw et al, 2021); evaluate the key performance indicators for commercial building renovations and fit-outs (Ho et al, 2021); and to propose a multi-criteria decisionmaking tool for procurement methods in ambiguous and vague construction circumstances (Su and Li, 2021).…”

Modeling duration of building renovation projects

“…The model comprises only two variables, namely, time and cost. Since then, several efforts have been made to validate Bromilow's time-cost model using other scope-based variables (Bromilow et al, 1980;Kaka and Price, 1991;Yeong, 1994;Chan and Kumaraswamy, 1995;Choudury and Rajan, 2003;Long and Young, 2009;Ameyaw et al, 2012). However, researchers have questioned the precision of these project scope-based models and have detected that they lacked the inclusion of several other non-project scope (qualitative) factors that impact construction duration (Walker, 1995;Ng et al, 2001).…”