Does Best Value Procurement Cost More than Low-Bid? A Total Project Cost Perspective

ABSTRACT

Although construction owners have long utilized Best-Value (BV) procurement within alternative delivery, they have historically been less willing to do so when selecting contractor teams in traditional Design-Bid-Build (D-B-B). In D-B-B, the availability of 100% complete construction documents implies that the lowest bidder should be selected. As conventional wisdom suggests, why select a more expensive contractor only to receive an equivalent scope of work in return? In response to this question, this study investigated the full cost implications to owners who utilized BV procurement within 118 D-B-B projects. Because BV involves potentially selecting a contractor whose bid is more expensive than the lowest bidder, an attempt was made to measure the cost of the selected contractor relative to the low bid alternative. Results indicated that while BV-procured contractors do come at a premium on average, they still provide lower bids than the market rate. Further, employing BV-procured contractors can be beneficial to owners in terms of project cost and schedule performance. This study contributes to the body of knowledge by developing two new metrics–the BV Premium and Total BV Cost–to quantitatively measure the project cost implications for owners who employ BV procurement to buy construction services within D-B-B.

KEYWORDS:

• Best-Value procurement
• Total BV cost
• BV Premium
• design-bid-build delivery method