Keywords: bidding, e-tendering, procurement, statistical analysis, price.

The "lowest bid" has long been the main bid award method employed in public construction projects in Taiwan. In a rational market situation, use of the lowest bid method can effectively cut costs and enable government funds to be utilized in the most efficient manner. However, when the industry is immature or the market is weak in terms of number of projects out in the market, the "lowest bid" mechanism often tends to cause cutthroat competition among vendors and poor construction quality.

Although "reasonable bid" mechanisms were instituted in Taiwan in the 1990s, the mechanism could not effectively prevent bidding collusion and ensure project quality. It tended to cause bid guessing and bidding collusion under false identity. It was therefore revoked soon after implementation. The "most advantageous bid" method was subsequently adopted following the promulgation of the Government Procurement Act in 1999. While the most advantageous bid method enables a general assessment of vendors' construction technology, quality, functions, commercial terms, and prices, this mechanism involves more complex administrative procedures and possible disputes. It is therefore by no means suitable for all construction procurement cases.

The "lowest bid", "reasonable bid", and "most advantageous bid" methods all take total bid price as their basis for award of bid. On the other hand, they all neglect the fact that item bid prices on the tender form can reveal whether the bidder has prepared its bid with care and whether the bid price is reasonable. Because their content is clear, item unit prices are more useful in judging reasonable prices than the total bid price. With the development of online tender forms and online tendering, the classification and scope of project items are presented very clearly on bid request forms. And since forms are stored as computer files, simple spreadsheet programs can be used to quickly assess the reasonableness of bid prices, increasing bid award information.

After reviewing the bid award mechanisms used in other countries, and discussing relevant issues with specialists in engineering operations, construction management, and statistical analysis, this study proposes a "qualified lowest bid" model based on the review of the bidders' project unit prices. This model assesses the reasonableness of bidders' bid prices after taking the project owner and market prices into consideration, and awards the tender to the qualified bidder submitting the lowest price. The model therefore ensures that the project owner can benefit from price competition, and encourages vendors to compete fairly.

Virtual case analysis is used to prove the mechanism's characteristics and the results are as follows:

1. Rigorous and scientific statistical analysis has been used to assess the qualified lowest bidding mechanism model. The result has confirmed and elucidated the logic and correctness of the mechanism's procedures.
2. The qualified lowest bidding mechanism can weed out unreasonably high or low bid prices and curb low-balling. It can do so without interfering with market competition by eliminating reasonable low-price bids.
3. Although qualified lowest bidding cannot absolutely guarantee all bidding collusion will be unsuccessful, the application of clustering in the bid award step imposes a significant restraint on collusion.
4. To include both the project owner's and the bidders' unit prices in the calculation of reasonable unit price can promote convergence on "reasonable market unit prices", and thereby establish a positive cycle facilitating the improvement of fair competition in construction market.

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