Handling Unbalanced Pricing in Bidding Regulations for Public Construction Projects

Unbalanced pricing is a common strategy adopted by contractors who participate in competitive bidding for construction contracts. This strategy exposes owners to several risks, and therefore bidding regulations of a number of contracting authorities include provisions that address this practice. Such provisions vary and range from restraining excessive utilization of unbalanced pricing up to the rejection of unbalanced bid offers as irregular and nonresponsive bids. This paper presents an analysis of the bidding regulations of state DOTs that address the unbalanced pricing of competitive bids in order to evaluate the adequacy of the current provisions in protecting the owner's interests. The paper includes the standpoints of these regulations toward unbalanced pricing and their adopted procedures and guidelines to detect and combat this practice. The paper presents an evaluation of the effectiveness of specific measures used by some state DOTs against unbalanced pricing. The evaluation indicates that available measures are somehow effective in handling overpricing early items in the contract performance, while they are less effective in handling the greater risks associated with pricing manipulations that exploit errors in estimated quantities of line items. The paper concludes with proposed rules that can be used by owners to handle unbalanced pricing more effectively, and can help in promoting fair competition among contractors.