Construction tender evaluation practice in China

Transcription

1 CIQ Construction Paper 235 Construction tender evaluation practice in China Xianhai Meng and Ming Sun Xianhai Meng PhD, MSc, BSc is a lecturer in the School of Planning, Architecture and Civil Engineering at Queen s University, Belfast. Before coming to the UK, he was an associate professor in the Department of Construction Management, School of Civil Engineering at Tsinghua University, Beijing, China. At the same time, he had many years experience as a tender evaluation expert in the China s construction projects. Ming Sun PhD, BSc is a professor in the School of the Built and Natural Environment at the University of the West of England, Bristol. He is also in charge of the Construction and Property Research Centre. ABSTRACT There are two main tender evaluation methods currently in use in the Chinese construction industry, the lowest evaluated price method and multi-criteria evaluation method. The aim of this paper is to examine the key issues with regard to the application of these two methods in practice. A comparison is made through applying them to a single case study, thus highlighting their strengths and weaknesses. It provides an overview of the current practice of tender evaluation in China, which is beneficial for international contractors and consultants who may be interested in bidding for projects in this country. keywords: Tender evaluation; Lowest evaluated price; Multi-criteria evaluation; Base price; Chinese construction INTRODUCTION After China started its economic reform and open door policy at the beginning of the 1980s, foreign businesses were allowed to invest directly in the country. The old planned economic system was gradually transformed to the market-oriented economic system through learning from developed countries. In the construction sector, competitive tendering was introduced to replace the traditional state assignment system. The purpose was to promote competition and improve efficiency of project investment (Shen and Song, 1998). Since then, it has been adopted in more and more construction projects. In 2001, 72.2% of building projects in the whole industry were procured through competitive tendering, the figure increased to 76.7% in 2002, 76.7% in 2003, 80.2% in 2004, and 80.6% in 2005 (NBS, 2002; NBS, 2003; NBS, 2004; NBS, 2005; NBS, 2006). There are various tender evaluation methods in China, depending on the type, size and location of the project. In practice, the two main evaluation methods are (1) the lowest evaluated price method, and (2) multi-criteria evaluation method. The lowest evaluated price method focuses primarily on tender price. It aims to help the client get the best price and achieve the lowest capital cost. Initially, it was mainly used in the projects funded by the World Bank (IBRD, 2004). Subsequently, more and more domestic projects adopted this method. The multicriteria evaluation method takes into account not only tender price but also other key factors such as tenderers technical capabilities and previous experiences. It represents a more balanced assessment of tenders. Government and public bodies usually require this method in order to achieve overall project success. The practice of tender evaluation has been investigated by many researchers. Crowley and Hancher (1995) and Wang et al (2006) regarded highly of the simplicity of the lowest evaluated price method. However, they also recognised the potential dangers of unreasonable low tenders and developed some methods to help with the identification of these tenders. Other researchers suggested improved methods which took into account other criteria (Hatush and Skitmore, 1997; Chua and Li, 2000; Mahdi et al, 2002; Tzeng et al, 2006). For example, Hatush and Skitmore (1997) favored the multi-criteria evaluation approach over the lowest price approach. They developed a set of detailed criteria for prequalification and tender evaluation, which include financial soundness, technical ability, management capability and health and safety performance of tenderers. Wong et al (2000) highlighted the need for a shift from the lowest price wins to multi-criteria selection in order to achieve best value for the client. The principles of the two tender evaluation methods used in China are broadly the same as those mentioned above. However, the tender evaluation practice has some distinct Chinese characteristics. For example, one of the main characteristics is the widely use of independent evaluation expert panels. A panel usually consists of a group of external tender evaluation experts together with one or two client representatives. These experts are selected at random from the evaluation expert bank developed and maintained by the regional governments. They are experienced professionals with advanced qualifications. The duty of the panel is to ensure fair competition and appropriate use of tender evaluation methods. In the following, the details of the two evaluation methods are explained, including the evaluation procedure and the assessment criteria. A comparison between them is given using a case study. THE LOWEST EVALUATED PRICE METHOD The earliest introduction of the lowest evaluated price method into China can be traced back to the Lubuge hydraulic engineering project funded by the World Bank in the early 1980s. In the last decade, there has been an increase in the use of this method due to clients expectation of promoting competition and saving money. According to this method, the client should award a contract to the tender which meets the client s substantial requirements in the tendering documents and offers the lowest evaluated price (NDRC, 2001). Tender evaluations for all projects are conducted by independent panels of experts on behalf of clients. Figure 1 illustrates the process of tender evaluation using the lowest evaluated price method, which basically includes the following five steps: 1. Responsiveness identification. The first task of the evaluation panel is to examine each tender to see whether it is substantially responsive to the client s requirements in such aspects as quality standard, project duration and previous experience. If a tender fails to meet the requirements, it will be rejected. 2. Feasibility analysis of the technical solution. The next task for the evaluation panel is to analyse the feasibility of the technical solutions. A tender whose technical solution is not feasible will be eliminated from further consideration. 157

2 Construction Paper 235 Figure 1 Tender evaluation process using the lowest evaluated price method Tenders Responsive to tender documents? Is the technical solution feasible? Error correction and price adjustment Is the price unreasonable low? Rejection construction (Chang and Ive, 2002). For this reason, it is hard to say that a low contract price will eventually turn out to be a low actual cost. In China, other damages of an unreasonable contract price include poor quality work, slow rate of progress and dispute between the contractor and client. The client usually suffers losses more than the initial gain from the low contract price. According to the Chinese Tendering Law, tender price lower than the true cost should be strictly prohibited (NPC, 1998). Comparing with the client s base price or other base prices, if a tender price is found unusually low, it is likely to be estimated under cost and impair contract performance. In this case, the evaluation panel should ask the tenderer to provide a reasonable explanation and relevant evidence. If the tenderer fails to do so, the tender is regarded as unreasonable low and should be excluded from the contractor s selection. (NDRC, 2001). In practice, when the client s base price method is used for the tender price evaluation, the client s base price is usually established before the tendering process. A tender is often regarded as an unreasonable one when its price is lower than 85% of the client s base price. Determination of the lowest evaluated price Award decision 3. Error correction and price adjustment. The third task of the evaluation panel is a detailed examination of each tender price s calculation to identify and correct errors. For example, when there is a deviation between unit price and item amount, unit price will govern and item amount needs to be corrected. In addition, necessary adjustment will be made to reflect any preferential provisions. For instance, a 3%-5% preference in tender price may be given to local tenderers in the projects of the West of China to encourage their development. MULTI-CRITERIA EVALUATION METHOD Multi-criteria evaluation method is developed on the basis of multiattribute utility theory (Holt, 1998; Hatush and Skitmore, 1998; Chang and Ive, 2002). In addition to tender price, multi-criteria evaluation method takes into account other key factors such as technical solution, contractor s organisation, financial capability, management resources, previous experience, performance record, current workload, past client/contractor relationship, safety precaution and so on (Russell, 1992; Holt et al, 1994; Fong and Choi, 2000; Lai et al, 2004). These factors or selection criteria vary in their importance. This is reflected in a weighting assigned to each criterion, for example 40% for technical solution and assurance system, 15% for capability and experience. An example is provided later on in this paper to illustrate the varied weightings given to different criteria. Generally, the multi-criteria evaluation process includes four main steps as shown in Figure 2: 4. Unreasonable low tender rejection. Generally, there are two methods for judging whether a tender price is unreasonably low. One is the client s base price method, and the other is the composite base price method. They are explained in detail later on in Tender price evaluation section. By comparing with the client s base price or the composite base price, the evaluation panel will identify whether a low tender price is reasonable. If a tender price is considered to be unreasonable low, it will be excluded from the contractor s selection. Figure 2 Tender evaluation process using the multi-criteria evaluation Tenders Responsive to tender documents? 5. Determination of the lowest evaluated price. After error correction, price adjustment and unreasonable low tender rejection, the remaining eligible tenders will be ranked according to their adjusted prices, or evaluated prices. The one with the lowest evaluated price will be chosen as the winner for the contract. The main selection criterion in the lowest evaluated price method is tender price. One of main tasks of the evaluation panel is to identify unreasonable low prices because they can distort fair competition. Technical aspect evaluation Commercial aspect evaluation Is the price unreasonable low? Rejection In theory, when tenderers compete on prices, more competition will result in lower prices and benefit to the client. However, in practice in China, fierce competition between large numbers of tenderers often leads to low, sometimes too low, tender prices. Unreasonable low prices can also be caused by wrong assumptions, errors in estimation or unscrupulous tactic by the tenderer to secure a contract. If a project is awarded to an unreasonable low tender, there is a high risk that the contractor will resort to opportunistic claims to recover losses during Award decision 158

3 1. Responsiveness evaluation. Once tenders are received, the first task for the evaluation panel is to identify whether a tender is substantially responsive to the client s requirements of quality standard and project duration. If a tender fails to meet the requirements, it will be rejected. Scoring against responsiveness criteria is then given to eligible tenders by all members of the evaluation panel individually and independently. 2. Technical aspect evaluation. The evaluation panel then analyses a tender s feasibility of technical solution and reliability of quality assurance system, schedule assurance system and safety precautionary measures. The evaluation panel also analyses whether a tenderer has adequate experience, whether the project manager is competent, and whether the project team includes essential professions. Scoring against technical aspect s criteria is then given to the tenders by all members of the evaluation panel. Table 1 An example of multi-criteria evaluation framework 3. Commercial aspect evaluation. After necessary error correction and price adjustment, the evaluation panel identifies whether a tender price is reasonable by comparing with the client s base price or other baselines. A tender will be rejected if it is considered to be unreasonable low or unreasonable high. Scoring against commercial aspect s criteria is then given to reasonable tenders by different members of the evaluation panel. 4. Calculation of overall scores and ranking. The total score of a tender is calculated by adding up all the products of the score awarded and the weighting of each criterion. It is calculated by each individual panel member. The final score of a tender is the average score by all the panel members. The contract is then awarded to the tender with the highest average score.. Criteria Maximum Evaluation standard Score Evaluation score range score 1. Responsiveness to the tendering documents (W 1 =5%) 1.1 Responsiveness substantially responsive to required quality standard to quality standard t substantially responsive to required quality standard 0, rejected 1.2 Responsiveness substantially responsive to required project duration to project duration t substantially responsive to required project duration 0, rejected 2. Technical solution and assurance system (W 2 =40%) 2.1 Feasibility of there is innovation in the technical solution technical solution 40 There is no innovation but the solution is feasible S 21 = T the technical solution is not completely feasible Quality assurance the quality assurance system is excellent system 20 The quality assurance system is good S 22 = T the quality assurance system is poor Scheduling and Both the scheduling and its assurance system are good assurance system Either the scheduling or its assurance system is poor On-site safety on-site safety precaution is perfect or trustworthy precaution On-site safety precaution is defective Plan of labour, equipment the plan meets the demands for labour, equipment and materials and materials Lack of labour, equipment or materials Capability and experience (W 3 =15%) 3.1 Company s previous the tenderer has similar experience five or more times experience in the tenderer has similar experience four times similar projects the tenderer has similar experience three times The tenderer has similar experience twice T the tenderer has similar experience only once 6-10 T the tenderer has no similar experience Project manager s the project manager has similar experience three or more times experience in the project manager has similar experience twice similar projects The project manager has similar experience only once 6-10 T the project manager has no similar experience Project organisation full range of essential professions in the project team structure Omission of any profession in the project team Performance track record 100% pass in project completion quality inspection in last two years Any failure in project completion quality inspection Honour awarded the tenderer has won honour from the Ministry of Construction The tenderer has won honour from the regional government 5 S 35 = T the tenderer has no honour awarded 0 4. Price and the amount of materials used (W 4 =40%) 4.1 Tender price the price is reasonable The price is either unreasonable low or unreasonable high 0, rejected 4.2 The amount of the amount of steel, cement and timber used is reasonable materials used The amount of three materials used is unreasonable 0-5 Total score=w 1 (S 11 +S 12 )+W 2 (S 21 +S 22 +S 23 +S 24 +S 25 )+W 3 (S 31 +S 32 +S 33 +S 34 +S 35 )+W 4 (S 41 +S 42 )= S 11 = S 12 = S 23 = S 24 = S 25 = S 31 = S 32 = S 33 = S 34 = S 41 = S 42 = CIQ Paper 235 Construction tender evaluation practice in China 159

4 Construction Paper 235 Most regional governments provide template evaluation frameworks for different types of projects. However, the specific selection criteria must be appropriate for and specific to a particular project. Therefore, a client can choose the right template framework and then make modifications to both criteria and their weightings (Pongpeng and Liston, 2003). For example, the clients in the large-scale projects may select on-site layout planning as a criterion in technical aspect. Smaller and simpler projects may not include it. The criteria and their weightings may vary from project to project, e.g., a public sector project may be different from a private sector project, and a building construction project may be different from a civil engineering project. Table 1 shows an example of multi-criteria evaluation framework developed for a building project in Beijing in It illustrates the list of selection criteria used and their weightings. As important guides, the definition of score range and evaluation standard for each criterion help all members of the evaluation panel to form their judgment and quantify their assessment. The criteria in the example shown in Table 1 are further explained in the following. Technical aspect evaluation With multi-criteria evaluation method, the technical aspect is one of the most important selection criteria. Responsiveness, technical solution, assurance system, capability and experience will be evaluated one by one. Among them, a good technical solution is always considered to be a prerequisite for project success. During tender evaluation, all technical solutions are assessed for their feasibility. A tender with an infeasible technical solution, e.g., an unreasonable process linkage between concrete reinforcement, formwork, placement and curing, will result in a very low score, between 0 and 10. On the other hand, those with innovation in their technical solutions, such as a significant improvement for slope protection, will be awarded high scores up to the maximum of 40. Tender price evaluation Commercial aspect usually includes tender price and the use of materials. Tender price accounts for the lion s share of the weighting, e.g., 90%. Therefore, the discussion in this section will focus on tender price evaluation. There are a number of different ways of evaluating tender price in practice. Three main methods are discussed in the following. Client s base price Client s base price is the project cost estimated by the client. When preparing tendering documents, the client determines the base price for a project. In order to ensure its accuracy, client s base price needs to be verified by the tendering administration office in the regional government. It is worked out based on the composite system of quantity take-off rules, unit cost and valuation methods. Therefore, it actually reflects the average cost for the same types of projects in the whole industry. In China, client s base price has been the dominant benchmark during tender price evaluation over a long period of time. It must be kept confidential from all tenderers in order to ensure fair competition. The outcome of tender price evaluation depends on deviation of the tender price from the client s base price, calculated using the following equation: r = (tender price client s base price)/client s base price (1) Each project has a valid tender price range, e.g. -5% to +5% of deviation from the client s base price. Any tender price outside this range will be regarded as either unreasonable low or unreasonable high, and will be rejected. Tenders fall within this range will be scored depending on the size of their deviations. In principle, the smaller the deviation is the higher the score will be. Table 2 shows an example of tender price scores based on different price deviations. The size of the valid price range and score distribution vary in different regions and for different types of projects. The example in Table 2 is for building construction projects in Beijing. Table 2 Evaluation criteria for tender price (maximum 90) Price deviation ratio Evaluation score r > +5% 0 +4% < r < +5% 65 +3% < r < +4% 70 +2% < r < +3% 75 +1% < r < +2% 80-2% < r < +1% 90-3% < r < -2% 85-4% < r < -3% 80-5% < r < -4% 75 r < -5% 0 The main purpose of adopting client s base price is to identify and eliminate unreasonable low prices or unreasonable high ones. However, deficiencies of this method have been gradually revealed in practice even though it has contributed to the development of competitive tendering system: 1. The price differential between different tenders is often very small because all tenderers want to set their prices close to the client s base price. As a result, the competition between them becomes very limited. 2. In practice, some unscrupulous tenderers would try every means, even illegal means, to find out the client s base price. In case of divulgence of the base price, the basis for fair competition will be seriously undermined. 3. There is another risk that the client s base price might be a wrong estimation. This could distort the whole tender price evaluation process, resulting in the wrong tender being selected. 4. If the valid price range is set inappropriately, e.g., too narrow, excellent tenders could be rejected because their prices just fall outside the narrow range. Composite base price In recent years, the use of the client s base price has been in decline in China and improved solutions such as composite base price are developed to overcome the weaknesses of the client s base price method. Composite base price takes into account not only the client s base price but also the mean tender price. It is calculated using the following equation: C = αa + βb (2) Where, C = composite base price; A = mean tender price excluding the highest price and the lowest price; B = the client s base price; α is the weighting of A, and β is the weighting of B. They reflect the priorities of tenders estimation and the client s estimation, depending on the project s nature and the client s expectation. In most cases, α = 0.6 and β = 0.4. However, in some cases, α and β are set equally to

5 Composite base price has become a prevailing tender price evaluation method in today s practice due to the following reasons: 1. Since the client s base price is no longer the sole target, tenderers can decide their tender prices independently. It is not necessary for them to guess the client s base price and try to set their prices accordingly. 2. With composite base price, an excellent tenderer offering a reasonable low price will not be automatically rejected any more. Therefore, tender competition is strengthened in the project. 3. Applying composite base price will ease the pressure of avoiding inaccuracy and divulgence of the client s base price. 4. The client s base price is still important in the composition to reflect the client s objective and expectation regarding to the project cost. However, there are also some potential problems with this method: 1. Because tender prices contribute to the composite base price, in case of collusion by all or many of the tenderers, they can manipulate the latter and influence the tender evaluation process. 2. Similar to client s base price method, composite base price method ranks tenders according to how close they are to a benchmark. With composite base price, there is still a possibility that a competent low tender is unfairly discriminated. Arithmetical progression method To encourage fair tender price competition under the multi-criteria evaluation, another improved tender price evaluation method has emerged: arithmetical progression method. According to this method, the evaluation panel ranks reasonable prices in the order from the lowest to the highest in numerical terms. The lowest reasonable price (LP) is awarded a score of 90, which is the maximum score for tender price criterion as explained in the evaluation framework of Table 1. Other reasonable tender prices (TP) are scored using the following formula: Evaluation score of TP = 90 x (1 5 x TP LP ) (3) LP The calculation above shows that, using the lowest reasonable price as a comparison, every 1% increase in price will lead to a 5% reduction in evaluation score. In addition, when arithmetical progression method is used, a tender price is usually suspected as unreasonable low if it is less than 85% of the client s base price or the composite base price, and as unreasonable high if it is greater than 110% of the client s base price or the composite base price. CASE STUDY technical feasibilities. ne of their prices needs adjustment. ne of them is considered as unreasonably low because they are above 85% of the client s base price. The result of ranking order is shown in Table 3 and Tender G will be the winner. Table 3 An example of the lowest evaluated price method 1GBP=12.0 RMB Yuans Second scenario is to use multi-criteria tender evaluation method. Tenders are evaluated in both technical aspects and commercial aspect. For the purpose of the case study, the following analysis only focuses on the evaluation of tender price. When the client s base price is used, the result of tender price evaluation is shown in Table 4. Tender C is in the joint first place with Tender D with the highest score of 90. Although Tender G in fact is one of the most competent ones, it is rejected together with tender A because their deviations from the client s base price are outside the valid range. Table 4 Tender Price ( ) Ranking A 80,923,074 7 B 78,625,267 6 C 77,191,782 5 D 76,969,114 4 E 74,778,268 3 F 74,078,448 2 G 72,596,664 1 An example of price evaluation using the client s base price Tender Price ( ) r (%) Score Ranking A 80,923, Rejected B 78,625, C 77,191, D 76,969, E 74,778, F 74,078, G 72,596, Rejected The client s base price is 76,495,955 If composite base price is used in this case, mean tender price equals to 76,328, Assuming α=0.6 and β=0.4, the composite base price will be 76,395, As shown in Table 5, the ranking order from tender price evaluation is completely changed. This time Tender D is the best; Tender A is still rejected due to going beyond the upper limit of the valid range of composite base price. However, Tender G is no longer rejected. Instead, it is now in the joint fifth place with Tender B. CIQ Paper 235 Construction tender evaluation practice in China This was a residential project procured in 2006 in Beijing. It consisted of 10 similar residential buildings of 6 storeys with underground parking. The total building area was 62,900 square meters. The scheduled project duration was 48 weeks. The client s base price for the whole project was determined as 76,495,955 ( represents RMB Yuans). The project went for open tendering. Seven tenders were received with varied prices ranging from 72,596,664 to 80,923,074 (see Table 3). In the following this project is used as a case study to demonstrate the application of the two reviewed tender evaluation methods. First scenario is to use the lowest evaluated price method. All seven tenders satisfy the essential requirements of responsiveness and Table 5 An example of price evaluation using composite base price Tender Price ( ) r (%) Score Ranking A 80,923, Rejected B 78,625, C 77,191, D 76,969, E 74,778, F 74,078, G 72,596, Here rc=(tender price-composite base price)/composite base price 161

6 Construction Paper 235 Assuming the arithmetical progression method is used in the above case, as shown in Table 6, the ranking order is exactly the same as produced by the lowest evaluated price method. However, the crucial difference is that rather than the lowest reasonable tender price being awarded the contract, it is just awarded a score higher than the others. This score will be considered together with other criteria scores before a final selection decision is made. It is possible that a tender with a higher tender price wins if it scores higher in other criteria. Table 6 In reality, multi-criteria evaluation method with composite base price was adopted in this project. Tender D was ranked in the first place during tender price evaluation. It was in fact chosen as the winning tender. However, if the lowest evaluated price method was used, the result would be different. This case study intends to illustrate different methods for evaluating tender price. Throughout the comparison, the assumption is that all tender prices remain unchanged. In practice, tenderers are informed of the tender evaluation methods before they submit their tenders. They usually adopt different pricing strategies and submit different tender prices accordingly. The purpose of using a single case in this paper is to illustrate different results can be achieved if different tender price evaluation methods are adopted. COMPARISON An example of price evaluation using arithmetical progression method Tender Price ( ) Score Ranking A 80,923, B 78,625, C 77,191, D 76,969, E 74,778, F 74,078, G 72,596, The two main tender evaluation methods currently used in China have been discussed above. There are some commonalities between them. For example, they both consider tender price as an important factor. They both assess a tender s responsiveness to the client s requirements. They both try to identify and eliminate unreasonable tenders. However, there are also some differences between them. For example, the lowest evaluated price method regards tender price as the deciding factor, while the multi-criteria evaluation method takes into account tender price and a variety of other key factors. To achieve project success, clients must choose a more appropriate tender evaluation method for their particular projects. Table 7 summarises and compares the strengths and weaknesses of these two methods, and outlines their suitability for different types of projects. The lowest evaluated price method is relatively simple and more suitable for open tendering or standard project procurement. Since the evaluated price is the predominate factor, sufficient competition among tenders is a prerequisite for using this method to get the best price. In case of insufficient competition, there is a high risk of collusion between tenders to push up tender prices. In situations like this, a maximum price can be set to protect the client. Multi-criteria evaluation method considers both technical and commercial factors in a systematic and balanced manner. The successful tender may not have the lowest price. However, it usually has strength in other crucial areas. This method can help to select the most competent and reliable contractor, which in turn leads to successful project delivery, better quality product and lower whole life cycle cost. For this reason, multi-criteria evaluation method is often used in large and complex projects or projects with high innovation requirements. Successful application of this evaluation method depends on the following two conditions: 1. A well defined evaluation framework, including the full range of evaluation criteria and their proper weightings to reflect the nature of project and the client s expectation. 2. A competent evaluation panel with the experts having a good understanding of the project s background as well as the client s expectation. CONCLUSIONS Since the competitive tendering system was introduced into the Chinese construction industry at the beginning of 1980s, there have been significant changes for project procurement and contractor selection in China. The lowest evaluated price method and multi-criteria evaluation method have become the two most widely used tender evaluation methods for construction projects. This paper has provided an overview of the application of these two methods in China and discussed some of the key issues associated with them. On the basis of the author s knowledge and many years experience of tender evaluation practice using these methods, a number of conclusions can be drawn: Table 7 Comparison of two tender evaluation methods Strengths Weaknesses Suitability Lowest evaluated price method Encourage price competition Help the client select the best price and achieve the lowest capital cost Simplify the evaluation process Sometimes lead to unreasonable tender price Sometimes cause problems such as poor quality, delay and dispute during construction Any scale projects Projects with ordinary technology Mainly open tendering Multi-criteria evaluation method Increase overall efficiency Help the client select the most suitable contractor Evaluate in a systematic and balanced way Develop criteria and their weightings to reflect the nature of project and the client s objectives Bring the difficulty in appropriate definition of criteria and their weightings Make the evaluation process complicated Sometimes lead to rejection of an excellent tender Mainly large-scale projects Projects with complex technical requirements Both open tendering and selective tendering 162

7 These two methods have played a positive role in transforming the Chinese construction industry from the traditional state planned system to a market- oriented practice. Today, the vast majority of construction projects are procured through competitive tendering. In response to this shift, the Chinese government has established relevant legal frameworks; including the Chinese Tendering Law (NPC, 1998) and the Regulation for Tender Evaluation Panel and Tender Evaluation Methods (NDRC, 2001). In China, most construction projects are funded by the public sector. Competitive tendering is fundamental to ensure fair competition. Numerous measures have been introduced to make the tendering process more transparent, such as open calls for tender, the publication of selection criteria, and the adoption of standard procedures, as well as the use of independent evaluation expert panel. In recent years, there are continuous efforts by governments at different levels and construction organisations to improve construction tendering practice by providing training and knowledge exchange events for people involved in bidding and tender evaluation. On the whole, the use of the two discussed tender evaluation methods has been successful. However, there are still some existing problems associated with each method. When the lowest evaluated price method is used, an unrealistic low contract price often leads to poor quality, disputes and actual cost increase during the construction phase. For multi-criteria method, at present the evaluation is usually limited to the assessment of written tenders by the expert panel within a very short time, e.g., one day in many cases. Inaccurate assessment results can be caused by incomplete information in the tenders, knowledge gaps of the evaluation experts, and insufficient time for the experts to make an assessment. Another common problem is the lack of follow-up performance monitoring regardless which evaluation method is used. There is a need for establishing a systematic monitoring and assessment system to measure the contractors real performance against their promises in the tenders. Further studies are needed on these issues in order to overcome the existing problems and improve the construction tender evaluation processes. Holt, G. D., Olomolaiye, P. O. and Harris, F. C. (1994) Applying multi-attribute analysis to contractor selection decisions. European Journal of Purchasing and Supply Management, 1(3), Holt, G. D. (1998) Which contractor selection methodology? International Journal of Project Management, 16(3), Lai, K. K., Liu, S. L., and Wang, S. Y. (2004) A method used for evaluating bids in the Chinese construction industry. International Journal of Project Management, 22(3), Mahdi, I. M., Riley, M. J., Fereig, S. M. and Alex, A. P. 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