Impact of Bonding Capacity on Performance of Construction Contractors and Market

Abstract

Bonding capacity is an important element in the construction competitive bidding environment. Despite numerous works dedicated to studying different aspects of construction bidding, the impact of bonding capacity on the performance of contractors and market is not explored yet. Using agent-based modelling, this paper aims to examine how bonding capacity affects the financial performance of contractors and market. Agent-based modelling is a powerful modelling tool for simulating the actions and interactions of autonomous agents with the aim of analysing their effects on the system as a whole. The results of this paper show that the extreme limitation of bonding capacity can make the market less efficient. Also, increase in the number of rational contractors as result of a proper bonding capacity limitation restricts the chance of irrational contractors winning from higher uncertainty in cost estimating.