Pergamon International Journal of Project Management Vol. 16, No. 3, pp.

153-164, 1998
© 1998 ElsevierScienceLtd and IPMA. All rights reserved
Printed in Great Britain
0263-7863/98 $19.00 + 0.00

Plh S0263-7863(97)00035-5

Which contractor selection

methodology?

Gary D Holt
School of Engineering and The Built Environment, University of Wolverhampton, Wulfruna Street,
Wolverhampton, West Midlands WV1 1SB, UK

Industrial and academic awareness of the need for judicious construction contractor selection is
increasing. Earlier investigations of this client procurement decision have more recently been
expanded upon; particularly, by work conducted in the USA and UK. Other countries are now
also addressing this issue and procurement research abounds. This paper complements that
increased activity by presenting a review of contractor evaluation and selection modelling meth-
odologies. These methodologies include: Bespoke approaches, Multi-attribute analysis, Multi-
attribute utility theory, Cluster analysis, Multiple regression, Fuzzy set theory, and Multivariate
discriminant analysis. The merits/ demerits and previous/possible future applications of each
methodology are discussed, and indications for future research given. © 1998 Elsevier Science
Ltd and IPMA. All rights reserved.
Keywords: contractor evaluation, contractor selection,construction tenders, decisional modelling theory

Introduction blem. (In this context evaluation is the process of in-

Construction project outcome may be measured in
terms of time, cost and quality achieved) Arguably,
the construction owner decision most impacting these
superlative 'value' criteria, is that of selecting the
appropriate, i.e. best, contractor) 3 (In this context the
term 'owner' means the client, or professional advisors
acting on the client's behalf). Hence, there is a growing
realisation that value achieved is as much a function
of the quality of contractor employed, as of project
cost. 4 However, the fundamental problem is." what con-
stitutes a sound contractor selection methodology?
Earlier investigation of this problem yielded much
proffering and philosophising, with regard to tender
evaluation and contractor selection: -~9 These works
have since been expanded upon both by the industry
(e.g.4"2°-24), and the academic world. Regarding the lat-
ter, a two pronged attack on this critically important
decision problem, has been witnessed over recent
years. Specifically; within the USA there has been
much work to improve the prequalification process 25-34
whilst the U.K. has witnessed development of the
H.O.L.T. (Highlight Optimum Legitimate Tender)
technique, designed to embrace the entire contractor
selection process) 5-41
Further investigations on this theme are being
undertaken worldwide, including the UK, Cuba,
Korea, Australia and Botswana. The objective of this
paper therefore, is to complement this increased ac-
tivity via critical review of some of the decisional
methodologies that are being, or show potential for,
application to the contractor evaluation/selection pro-
vestigating or measuring contractor attributes.
Selection is the process of aggregating the results of
evaluation to identify optimum choice). In performing
this review, the paper also highlights merits/demerits
and gives example applications of the methodologies
considered. These methodologies include: Bespoke
approaches (BA), Multi-attribute analysis (MAA),
Multi-attribute utility theory (MAUT), Multiple re-
gression (MR), Cluster analysis (CA), Fuzzy set theory
(FST), and Discriminant analysis (MDA).
Methodologies review
Absolute classification of some selection methodologies
is not possible. For example; BA tend to utilise several
approaches, 42 so an element of 'overlap' occurs.
However, distinct classification of techniques is
attempted as far as possible. Further, it must be
accepted that definitive description is not possible in
the space available. Therefore, references are compre-
hensively cited throughout the narrative so that the
interested reader may follow up additional detailed, or
specific, aspects elsewhere.
Bespoke approaches ( B A )
Generally, BA tend to be evidenced in terms of ad hoc
evaluation/ selection methods having been developed
by, and therefore familiar to, a particular construction
owner. They tend to incorporate several decisional
techniques simultaneously, and evidence much var-

153
Which contractor selection methodology." G D Holt
INITIAL
I SUBMISSION
/
Eg.,ISO9000 / . . . . Are all 'musts' Ill
Accreditation satisfied'?
I
~ YES
Divide tender ~
into components
I All components
satisfactory? i perience, intuition and hunch play as important roles
YES
Forproject I
prequalgicatien..,
[ preqnalification...
I
Select (best) ~
Place contractor
required number onto select / standing
of tendecers
l
INVITE ~
TENDERS ~ ...........
Figure 1 Typical stepwise procedure for bespoke approach
iance.~ Therefore, because of their disparate nature BA
are difficult to classify in terms of a single parameter.
However, most tend to follow a procedure akin to that
exhibited in Figure 1.
The initial stage of BA usually concerns adjudication
- - e i t h e r by an individual decision maker (DM) or, an
amalgam of D M ' s in the case of larger construction
owners. Typical, is investigation of contractors' sub-
missions for preliminary 'conforming' criteria, often
referred to as cut-off points 43 or musts. 44 Such criteria
are often a function of client predilection. For
example, has the contractor achieved International
quality assurance accreditation? 45 A binary decision
(YES/NO) normally follows, with non-conforming ten-
ders (i.e. a N O in one criterion) being instantly
rejected. On the face of it, this is a logical and effective
way of reducing an original (typically large) set in ac-
cordance with owner prerequisites or predilections.
Nonetheless, the risk is ever present that a 'good' con-
tractor may be wrongly precluded early in the proceed-
ings.
Conforming tenders (i.e. those not excluded) are
then normally decomposed (e.g. into financial/health
and safety aspects), to enable scrutiny of specific areas.
For example, observation of accounting ratios 37'46-4s
and/or, calculation of workload capacity 31"49 is typical
for financial examination. Regarding health and safety,
then in a U K context; ' H a s the contractor formulated
an internal safety policy in accordance with Section
2(3) of The Health and Safety at W o r k Act? '5° is also
154
a typical question. For each of these decomposed
aspects, second stage binary decisions as per those
described above are often made, again, with non-con-
forming tenders being rejected. At this juncture and
with respect to conforming contractors then either; (i)
where prequalification is being performed per project
NO (cf. ~) submissions may have final review to select the
desired number of tenderers; or (ii) contractors may be
placed onto a select or standing list for ultimate invita-
tion to tender (refer Figure 1). It is these latter stages
that have the greatest dependence on subjectivity - -
often a function of client/practitioner past experience
with the contractor, and/or practitioner judgment
based purely on experience of the process. 34 One may
consider the practitioner's role in this respect as being
analogous to that of contractor's estimator; where ex-
as academic ability. 5~
In summary: BA are commonplace in industry; exhi-
NO I b bit substantial variance; and rely heavily on binary de-
cisions and subjective interpretation. As a result of
their implementation the owner may, or may not, con-
tract with the best firm but (in the absence of a formal
F°rsb°"l"t/ evaluation/output mechanism) may not know this until
the project is well under way! Clearly, a numeric
measure, yardstick, datum or score would improve the
¢
BA approach, if only as a means of comparing con-
tractors relative to each other.
or rotattonal list
i
i
'
i
Multi-attribute analysis ( M A A )
M A A considers a decision alternative with respect to
several of that alternative's attributes. In this respect
an attribute is a characteristic that can be measured.
An objective is a characteristic against which an attri-
bute is measured and should be pursued to its fullest.
Hence, a contractor attribute represents one aspect of
a decision option with respect to a client objective. 52
Attributes may be measured quantitatively or other-
wise. Indeed, a feature of M A A is that some or all of
the attributes may not be quantifiable. 53 The most
simple M A A equation may be expressed as;
n
ACrj = (1)
i=l
where: ACrj=aggregate score for contractor j;
VU= variable (attribute) i score in respect of contractor
j; and n = the number of attributes considered in the
analysis. These are termed 'simple scoring' M A A
models and because of their simplicity are frequently
employed by D M ' s in industry. 52 An example of a
simple scoring contractor selection model may be
observed in Janssens. 43 Their biggest failing is that Vi
(albeit numeric) is often a very subjective measure.
That is;
Vi = ~--~f(xi) (2)
i=1
where: f(xi) are the n functions of V; normally subjec-
tively (often implicitly) considered by the practitioner
during evaluation. An improvement on Equation (1).
is to attach weighting indices ( W i) to Vi thereby
accentuating contractors' aggregated scores who per-
form better in higher weighted criteria and vice versa.
 Which contractor selection methodology: G D Holt

Table 1 Hypothetical MAA example

Input Output
V1 W1 V2 W2 V3 W3 V4 W4 V5 W5 ACri ACrimax UACrj Rank
Crl 8 8 2 10 10 7 8 10 6 9 288 440 0.652 2
Cr2 7 8 3 10 10 7 3 10 3 9 213 440 0.484 4
Cr3 4 8 10 10 4 7 5 10 5 9 255 440 0.583 3
Cr4 7 8 8 10 6 7 7 10 8 9 320 440 0.731 1
Vi & Wi scored/weighted 1 to 10

Hence; Multi-attribute utility theory ( MA UT)

ACrj = ~VijW i
i=1
Wi may be a function of;
1. sole practitioner experience/predilection
2. group consensus opinion
3. survey and analysis of data, from a sample perti-
nent to the selection setting in which the model will
be applied. 39
Where the components (Vi and kV~ in this instance)
are represented by an infinite range of integers then a
unified aggregate contractor score (designated UACrj,
i.e. 0 < UACrj<I.O) m a y be achieved via;
UACrj -- ACrj
A Crjmax
where: the components are as previously described;
and ACrjm~x is the m a x i m u m attainable aggregate
score utilising HI,..
Table 1 shows the hypothetical evaluation of four
contractors in respect of five attributes utilising all the
M A U T is an extension of M A A and as will be shown,
(3) is particularly suited to the problem under discussion.
M A U T utilises 'utility' to quantify the subjective com-
ponents of MAA.
First, it is necessary to appreciate the concept of uti-
lity. Utility (normally expressed as Ui) is a measure of
desirability or satisfaction; of a characteristic (attri-
bute), of an alternative (contractor)J 7 A utility value is
an abstract equivalent of the attribute being considered
from natural units such as years, or £, into a series of
commensurable units (utiles) on an interval scale of
zero to 1.0. Such transformation of values may, or
may not be, a linear function - - t h i s is primarily
dependent upon the DM(s) or expert(s) from which
such functions were derived (e.g. risk seeking /risk
(4) averse) - - s e e Figure 2.
The overall concept of M A U T can be very complex
with respect to both models and utility weight deri-
vation. Hence, the reader is directed in the first
instance to; 5~59. M A U T may be applied to the con-
tractor selection problem in one of two fundamental
ways. Consider;
n

concepts described above. Notwithstanding that M A A ACrj = y ~ U i (5)

has previously been researched with respect to this
problem setting, the derivation of essential Vi and, the
strength of W~ should be further investigated (e.g. with
respect to geographical location of project, nature of
work, form of procurement option employed etc.). A
general discussion on M A A decision making may be
observed in M o o r e and T h o m a s 54 whilst detailed treat-
ment is given elsewhere. 52-56
i=l
where: U; represents the n attributes considered by the
DM. These are a function of several dimensions i.e.
Ui = Y~J(uxi). (ref. Equation (2,)). Hence, the sum of
integers Ui yield an aggregate score which may if
necessary, also be unified as described in Equation (4).
Alternatively, Ui may be used in conjunction with scal-

risk seeking functions

Max Ui 1.00

0.75 risk neutral

function
Abstract
expressed
equivalent 0.50 i
in utiles
(Ui)
0.25 averse functions

Min Ui 0.00 I

Min natural unit Xi Max natural unit

Figure 2 Characteristic utility curves. For the utility curves shown then natural unit (Xi) has utility values in the ranges; risk
averse: zero to 0.2, risk neutral: 0.6, risk seeking 0.9 to 1.0

155
Which contractor selection methodology: G D Holt
ing constants or weighting coefficients as follows;
tl
ACrj = ZUiWi (6)
i=1
where components are as described previously and n
are the number of attributes.
In short, M A U T is similar to MAA in modelling
terms but utilises a quantitative method of determining
values for inclusion therein. Hence, M A U T can quan-
titatively consider both tangible (e.g. safety record)
and intangible (e.g. contractor image) attributes,
during evaluation. The existence of such subjective
measures characterises the contractor selection pro-
blem. Regarding future research, there is scope for
developing utility curves in respect of alternative scen-
arios (as intimated in the previous section) and with
respect to differing owner groupings.
Multiple regression ( M R )
M R is a statistical technique whereby an equation is
constructed to observe and ultimately predict the effect
of several independent variables upon a dependent
variable. That is, an M R equation will predict a nu-
meric outcome (designated Y*) this being a function of
several independent variables Vl, Vz... Vi. For a given
scenario j; represented by several dimensions; Vjj there
will be an actual outcome; Y. It is from the statistical
analysis of several of these scenarios from which an
M R equation may be constructed. Clearly, any differ-
ence between predicted (Y*) and actual, may be for-
malised as Y * - Y; such difference(s) being termed
residuals. The lesser number/smaller magnitude of
these residuals, then the more accurate is the M R
equation. An M R equation may be formalised as;
n
Y* = Co + y ~ Vici (7)
i=1
where: Y* represents the dependent variable; V,- are the
independent variables; ci are the partial regression
coefficients; Co is a constant representing the intercept
upon the y axis of the resulting regression line; and n
is the number of independent variables within the
equation.
Thought of in the space of an x:y graph, then
changes in V; will result in a change for Y*. Each indi-
vidual coefficient c; accounts for partial change in Y*
thus the term 'partial' regression coefficient. When
V i = 0 then Y* = Co. Reverting to Y * - Y, then 'good-
ness of fit' of the regression line is represented by R2:
the coefficient of determination. For example, if
RZ=0.8 for a given equation then 80% of movement
in Y* can be attributed to movement in Vi. The larger
R 2 is, then the more accurate a predictor is the
equation based on the input data upon which it was
built. Having briefly discussed the technique, how can
it be applied to the problem under review? Firstly,
there is scope for building M R equations to yield con-
tractor prequalification scores, based on contractor
(interval) attribute data. Such an approach has been
tentatively investigated 6° the resulting equation being
of the form;
156
P1 = 0.311 + 0.151 I"1 + 0.035 Vs + 0.154V9
- 0.159 Vt9 - 0.031 I"2o + 0.232 V2t (8)
where: P1 = prequalification score; Vl =size of con-
tractor organisation; Vs=quality of bank reference;
V9 = quality of creditor references; V19 = past perform-
ance (time overruns); V20=past performance (cost
overruns); and V21=past performance (quality
achieved). For this equation R 2= 0.96.
Obviously, there are essential 'musts' in respect of
contractors desirous to tender (refer BA), such as ade-
quate insurance; adequate bonding capacity and finan-
cial stability. Hence, using the above M R approach
then prequalification might follow the route as exhib-
ited in Figure 3. Again, here is an area that yearns for
further research.
Equation (8) was derived from a limited sample size
and in respect to 'smaller' projects, hence the potential
for development of M R models based on inter alia; a
larger sample; projects of particular character; and
contractors of a specialist nature. Further, were con-
tractors' past performance measures (time, cost, qual-
ity) each quantified and used as dependent variables
(i.e. regressed upon separately) then three M R
equations would result; with potential to predict future
contractor performance in respect of each of these
superlative owner objectives.
To simplify and rationalise this task, which would
involve an inordinate number of contractor attri-
butes, 2'39"6° then the particular method of stepwise re-
gression (vis-a-vis simultaneous regression which has
been described thus far) may be considered. An excel-
lent overview of the stepwise technique may be found
in Kinnear and Gray. 61 Mohsini and Davidson 62 may
also be observed for example application of M R in a
construction context.
Cluster analysis (CA)
The nature of the problem under consideration in this
paper involves a theoretically infinite range (set) of
contractors, albeit this will be a function of tendering
arrangement employed. 63,64 The principal task there-
fore, is one of reducing this original set into a series of
smaller, manageable sub-sets of like character. By ana-
lysing these sub-sets, the quality (i.e. attributes) of con-
tractors therein may be observed and the best sub-
set(s) identified for subsequent tender invitation if pre-
qualification is being performed. Alternatively, the
characteristics of sub-set membership would help in
assigning contractors to standing lists (e.g. specific
work types or, project sizes). Fundamental benefits of
a CA approach are threefold;
1. application of a limited number of previously ident-
ified controlling criteria (see below) to the entire
original set, rationalises the evaluation process but
facilitates effective investigation of a// members;
2. this negates the possibility of rejecting 'good' con-
tractors at an early stage in the procedure (a risk
synonymous with the binary decision approach - -
refer BA);
3. achieving this minimises owner resource commit-
ment i.e. maximum yield on the cost of information
collection and processing; (cf. 52"54) and hence, maxi-
 Which contractor selection methodology: G D Holt

Contractors desirous
to tender

1" I
Bonding capacity
Ale 'musts' ~ NO [ Reject ]l
satisfied?

4
iI
i I

I YES
Evaluate MR attributes
achieve interval data

Apply MR equation
P1 = Co + ~Vi ci

¼
Rank contractorsbased on •
Prequalificationscores
I
I Select desired number of
tenderers ie., highest
P1 scores

Figure3 Possible stepwise procedure for an MR prequalification model

m u m potential for achieving client satisfaction from
selecting the best alternative(s).
The method takes a given number of contractors,
each being described by a set of numerical attribute
scores and, uses a classification algorithm to group the
contractors into a number of clusters such that con-
tractors within classes are similar and unlike those
from other clusters. 65 Two particular types of CA are
suitable: jointing-tree clustering and k-means cluster-
ing. I f jointing-tree clustering is firstly applied to the
original set, it establishes the most significant number
of clusters inherent within it. That is, amongst the
pooled contractor data, we assume no priori hypoth-
esis with regard to number of sub-groups. The output
of this initial analysis is a tree diagram known as a
dendrogram. Figure 4. shows a dendrogram for 19
contractors (Crl, Cr2,...Crl9), segregated into two prin-
cipal clusters. The x axis exhibits each contractor in a
class by itself. As we progress upwards, the threshold
regarding when to declare two or more contractors as
being similar are relaxed, so more and more contrac-
tors are clustered until finally in the uppermost part of
the dendrogram, all contractors are linked together.
Thus a clear 'structure' in terms of contractors that
are similar to each other is reflected in the hierarchical
tree as distinct branches. Distance between branches of
the tree are proportional to the dissimilarity between
contractors.
There are various CA algorithms. However, the
most straightforward way of establishing degree of
difference between contractors, is to compute
Euclidean distances. This measure is computed as;
where: D o is the distance between two points i: j; and
xik is the value of the kth variable for the ith entity. 66
In summary, jointing-tree clustering graphically shows
via a dendrogram, the number of 'natural' clusters
within a given original set of contractors.
k-means CA establishes k clusters from the data
where k is defined by the practitioner. Therefore, the
former method provides a posterior hypothesis for k-
means analysis, k-means CA begins with k random
clusters, moving contractors between them to minimise
variability within clusters and, maximise variability
between clusters. As a result of the analysis, the mean

157
 Which contractor selection methodology: G D Holt

Cluster 1 Cluster 2
1.4 .....................

,i!i
1.2 I ,............. i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0
0.8

0.6
i
0.4

O. o.o, , , , ...........
, ,

Crl7 Crl9 Cr8 Crl2 Cr4 Crl6 Cr2 Crib Cr9 Crl
Crl4 Crl5 Cr7 Crl0 Cr3 Crl I Crl3 Cr6 Cr5

Contractors (Cr)
Figure 4 Jointing-tree CA output: dendrogram. Vertical axis: respective distance from cluster centre

values of each attribute, within each cluster, may be
examined. This; (i) confirms how distinct the k clusters
are; and ii) identifies the most discriminating criteria.
That is, the process identifies the controlling variables
referred to at the outset of this section. Clearly, this
provides m a x i m u m potential for rationalisation of the
purchasing process, because only significant discrimi-
nators need be considered.
Table 2. details mean criteria scores and A N O V A
output for the hypothetical selection scenario shown in
the earlier dendrogram. Eight selection criteria (V~,
I1"2..... II8) have been utilised, although in reality a lar-
ger number of criteria will apply. 39 The Table estab-
lishes that there are four controlling criteria
(significant at the 95% level), these being: V1, V6, V7
and V8. Controlling variables are easily identified on
Figure 5., this being a graphical plot of these final clus-
ter centres, in respect of each selection criterion. These
'cluster profiles' also confirm that cluster 2 is the 'bet-
ter' set of contractors; with higher mean scores
achieved in all variables except: II5 and Vs. For the
purposes of this example it was assumed that contrac-
tor attributes ( V i) were evaluated and scored on an
interval scale where: 0 < Vi<l.O (see37'4°).
Fuzzy set theory ( F S T )
Another characteristic of the problem under discussion
is that it encompasses uncertainty, functions of which
are: imprecision, randomness and ambiguity. 67
Probability theory is often associated with random-
ness, but such theory attempts prediction of future
events based on previous events. Unfortunately, con-
tractor selection does not fit neatly into this framework
because each selection exercise is a one-off and hence
different. However, FST can model human judgment
and cope with uncertainty. 67 Further, FST can deal
with multi-criteria information which, may also be
imprecise and subjective. 68 These features characterise
the contractor selection problem. ~,~2 FST principles
were introduced by Zadeh 69 and may be described in
terms of full, or partial membership of a set, for a
given case (Crj) in question.
To help explain the concept we shall revert back to
BA for a moment. It is recalled from that example
that binary decisions were made e.g. the contractor
does, or does not, have a formal safety policy. This is
a perfect example of classic set theory i.e. the contrac-
tor is, or is not, a member of the respective (does, does
not) sets. FST takes this a stage further i.e. the degree
of membership may be measured and a membership

Table 2 Mean criteria Scores and ANOVA: Clusters l and 2

Variable Mean scores Analysis of variance

Cluster 1 Cluster 2 Between clusters* Within clusterst Significance (P)

Vj 0.42 0.79 0.64 2.50 0.052
Vz 0.90 0.91 < 0.01 0.25 0.911
113 0.80 0.85 < 0.01 0.75 0.650
V4 0.80 0.92 0.06 0.38 0.102
V5 0.33 0.27 0.01 0.49 0.440
V6 -- 0.65 2.00 2.02 0.000
V7 0.42 0.79 0.64 2.50 0.052
1/8 0.73 0.18 1.45 2.76 0.008
*Sum of squares (! dj')
t S u m of squares (17 dJ)

158
 Which contractor selection methodology: G D Holt

0.9
0.8
'a
0.7
0.6
• ..... ! .... .... r ....... /-.,:- . . . . ....
• -I . . . . . . . . . ', . . . . . . . . . . . " . . . . . . . . . . . ', . . . . . . . . . . L . . . . . . . . . . . ', ---I--- Cluster 1
0.5
. . . . . . . . . . . :. . . . . . . . . . . ~. . . . . . . . . . . ', . . . . . . . . ix.L . . . . . . i Q Cluster 2
0.4
0.3
0.2
0.1 _/ . . . . . . . . • . . . . . . . . . . . :
x /
0 I !
VI V2 V3 V4 V5 V6 V7 V8
Variables (Vi)
Figure 5 Mean Vi profiles for clusters 1 and 2

value (Mv) assigned, where; 0 <Mv_<l.0 and

1.0 = m a x i m u m strength o f membership.
This is fully elucidated in Figure 6, the fundamental
message being, that F S T facilitates ordinal sorting o f
Crj albeit, overlap m a y occur in terms o f description.
I I I I I 1 T h a t is, there is an element o f 'fuzziness' between sets
Cr 1 Cr2 Cr3 Cr4 Cr5 Cr6 (cf. sets A, B, C). Mathematically, and with reference
I I 1 I i I to the Figure, if U represents the universe o f objects
Does the contractor have a formal health & safety policy? under consideration then set A is a fuzzy set in U

I
YES NO
i i
NO
i
YES YES
i YES
i where;
h = {Crj,l.tA(Crj)} (10)
i I I I I I
when: U=A; Crj e A (in this instance C r 4 only) and;
I #A(Crj) defines the strength o f membership (Crj in A)
being a real n u m b e r on the interval 0.0 .... 1.0 which in
turn is a function o f the membership value (My) o f Crj
Fuzzy set theory in U.
F o r Figure 6 then; llA(Cr2 a n d 3) = 0.0 i.e. non mem-
i!
bership o f D in U and; #xA(Cr4) = 1.0 i.e. full member-
: ( SET I:YES "~ ship o f Cr 4 in A and hence, o f A in U. The Figure also
: ~ Crl, Cr4, Cr5, Cr6 I demonstrates that non-numerical measures (linguistic
r-~ i Mv=l.0forall [ Ii
\ members ,) Extent of policy 1 in this instance) m a y be a c c o m m o d a t e d by FST.
determined and expressed However, the boundaries between sets can cause con-

I
as Mv where; 0.0 = NO fusion, for example, where is the delineation between
& 1.0. = maximum
SET 2: NO 1 formal policy M I N I M U M and S T R O N G ? T h a t is, into which set
_ _ll,.t Cr2 & Cr3 would go a c o n t r a c t o r with an My o f 0.5? The firm
l Mv = 0.0 for 'all might have tentative membership o f the S T R O N G set
k, members
or, m a x i m u m membership o f the M I N I M U M set.
• ~ s,,.¢ "e•
To satisfy this problem, there is scope for future

{Cr4.Mv=lOfJ
--" •" : i
I I development o f F S T 'membership functions' in respect
Se, A ~"" ~. :( SetD "~ o f n c o n t r a c t o r attributes. Such functions could be
MAXIMUM _]
based on the a p p r o a c h o f Dexter and Hales 7° that is,
STRONG
Cr5. Mv = 0.9
t :
'" i ° "ICr2, Mv : 0.0 I
I~r3, Mv = 0.0J each c o n t r a c t o r attribute being d e c o m p o s e d into a
g r o u p o f membership profiles based on either;
Cr6, Mv = 0.7 1. practitioner predilection/expertise;
SetC
MINIMUM 2. g r o u p consensus opinion; or
Crl, Mv = 0.3 3. quantitative derivation via stratified survey o f rel-
evant expert opinion.
Figure 6 The fundamental concepts of classic/fuzzy set the- Figure 7 shows a set o f profiles for the health and
ory safety attribute discussed above. Albeit hypothetical,

159
Which contractor selection methodology." G D Holt
1.0 Contractorwith perceivedlevel of formal safety policy at 48%
achieves Mv of 0.5 which may be described as max
membership strength of MIN set or, tentativemembership of
STRONG set
Membership
value 0.5 ~
NO = zero
score
/ ?,i
zero
o lO 20
Perceivedlevel of formal safety policyexpressed as percentage
Figure 7 Hypothetical memebership functions for the variable: health and safety policy
the profiles underline the future potential of this
approach. However, FST may only find lukewarm
reception amongst practitioners because of its complex
nature. For further narrative on the technique the
reader may o b s e r v e : 69'7~ 76
Multivariate discriminant analysis ( M D A )
In essence, M D A studies the differences between two
or more objects with respect to several variables, sim-
ultaneously. 77 In the context of this paper, then by
examining contractors' previous performance on job-
site and, the characteristics of those contractors, one
can determine:
I. which if any of the contractor attributes are discri-
minators i.e. have the ability to predict performance
on future jobsite;
2. how these attributes might be combined into an al-
gorithm in order to achieve (/) and;
3. the accuracy o f any such derived equation, v7'7~
In short, we may consider different types, and sizes,
of contractors (Crj) in tandem with a range of multi-
variate selection variables. In such instances of varia-
bility amongst cases and measures, M D A is the most
appropriate techniquefl 9
The basic prerequisite of M D A is that two or more
groups exist which are presumed to differ on several
variables ( V i) and, that these can be at the interval or
ratio level. 77 However, for a given analysis: Vg must be
<_(Crj+ 2). M D A then analyses the differences between
groups and subsequently interprets and/or classifies.
Interpretation studies the differences between group
attributes and therefore, yields the knowledge of how
discrimination between (say; good, not-so-good and
bad) groups is achieved. Importantly, M D A identifies
the controlling criteria i.e. most powerful discrimina-
tors, this bringing with it the benefits of a rationalised
technique elucidated under CA earlier.
Classification provides a means o f assigning any pre-
viously unanalysed contractor into a group it most clo-
sely resembles. Hence, we may regard classification a
subsequent function o f M D A interpretation. The tech-
nique begins by finding the most discriminating Vi.
160
!
I
I
/
/
; . . . . . . . / MAX
/ Vl
30 40 50 60 70 80 90 100
y
This variable is then combined with each of the other
variables in turn until the next variable is found which
contributes most to any further discrimination between
the groups. The process continues in a similar manner
until such time as very little discrimination is gained
by inclusion of any further variable. The large amount
of calculation required calls for a computer software
package such as the SPSS-PC+ (or Windows) suite of
programmes, 58 an overview of which may be found in
Kinnear and Gray. 61'8°
Based on the M D A discussion thus far one might
question its uniqueness, particularly, with retrospective
comparison to CA and MR. This may be explained by
observation of Figure 8. That is, above the dashed line
on Figure 8 is shown MDA: where no independent
variable (either Vi or Gj) is designated prior to analysis
(otherwise this would be analogous to MR). Below the
dashed line, the value of V, is a function of Gj this
being an extension of multivariate analysis of variance
and therefore, analogous to k-means CA earlier.
Hence, the uniqueness of MDA is identified.
M D A has to some extent previously been applied to
the problem under discussion. Specifically, to predict
future jobsite performance of Hong Kong contrac-
tors. 79 The resulting canonical discriminating function
was o f the form;
Zi = Co -~- CI VI --1-C2 V2 --~ ..... -~- C6 V6 (ll)
where: Zt is the predictive contractor performance
index; Co is a constant; CL.,6 are the discriminating
coefficients; and V~,..,6 are the discriminating variables
governing contractor performance these being: com-
plexity of project; percentage of professionally quali-
fied staff; project leaders experience; contractors past
performance or image; origin of the company and con-
struction owner's control, vs
The research cited used a retrospective approach for
validation of the model, based on 'good' and 'bad'
project outcomes in Hong Kong. However, there is
future scope for inter alia; concurrent validation of a
derived discriminant function by using live projects.
Further, such an approach would facilitate comparison
of project outturn (refer superlative value criteria in

Above dashed line = MDA
relating one nominal
level variable (Gj) to
several interval
level variables (Vi)
Below dashed line is a function
of multivariate analysis of variance
ie., value of Vi dependent upon
designation of Gj
Figure 8 The interface of Gj and Vi in an MDA context
introduction) with previous levels of client satisfaction
for the firms analysed (cf.8~), using covariance analysis.
The reader will find comprehensive, introductory text
on the M D A concept in Klecka, 77 whilst the works of
Skitmore and Marsden 58 and Abidali 47 provide excel-
lent examples of M D A in a construction setting.
Conclusions
This paper has reviewed several decisional method-
ologies which are being applied, or show potential for
application, to the contractor evaluation and selection
task. The paper does not purport to have discussed all
possible solutions. For example, the application of
case-based-reasoning has been considered elsewhere 82
whilst the concept of neural networks has not to the
author's knowledge, yet been considered. However,
based on this paper, it can be established that certain
approaches are particularly suited to specific aspects of
this decision problem.
First, regarding the problem strategy, a two stage
procedure (stage 1: prequalify, stage 2: evaluate ten-
derers) is desirableJ 's3 The first stage should consider
all contractors desirous to tender with respect to
'essential' contractor organisational criteria. Such cri-
teria include: past performance, past experience, and
financial stability. 37 The second stage should consider
specific contractor suitability for the proposed project.
Project specific criteria include: office location with
respect to project, experience in the geographical
region, and experience of the proposed construction
methods.2.37, 40
Based on this review it seems that the C A technique
offers greatest potential for the first stage. Primarily,
this is because it can deal relatively easily with the po-
tentially large numbers of contractors involved. That
is, CA reduces the probability of rejecting a 'good'
contractor too early in the process via subjective re-
duction of the often large original set (as is the risk
with BA). Further, CA would offer scope for rational-
isation of the selection process by identifying the con-
JPMA 16/3 B
Which contractor selection methodology: G D Holt
G1
trolling (prequalification) criteria involved. Finally, the
technique is not over-complex; it is familiar to most
statistical software suites; and yields a numeric/graphi-
cal output that may be quickly interpreted by prac-
titioners. This is particularly so if one considers the
cluster profiles introduced in Figure 5. A more compre-
hensive description of this rationale may be observed
in Holt. 65
Second stage evaluation has been previously investi-
gated using M A U T . 52 However, as indicated in this
paper other methodologies offer equal scope in this
respect. An 'at-a-glance' conclusion to this review is
given in Table 3, which also highlights salient merits/
demerits of each methodology with regard practical
application to the contractor selection problem. The
methodologies may be summarised as follows:
BA: prolific industrial use but very subjective
MAA: academic and industrial use but can be
subjective
M A U T : academic use, scope for derivation of
alternative utility functions
MR: evidence of academic use, scope for further
research and industrial application
CA: limited academic use, scope for further
research and application to prequalification
FST: evidence of academic use but may be too
complex for acceptance by industry
M D A : academic use, broader scope for research
and industrial application.
Future research should be addressed towards those
methodologies identified as requiring such. That is:
development of the selection model; retrospective/con-
current/predictive application to the problem; and ulti-
mate validation by observation of output. 84 In the final
analysis, whichever selection methodology is employed
the best protection against a bad selection decision is a
good selection procedure! ~
161
 Which contractor selection methodology. G D Holt

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Engineering. Civil-Comp Press, Edinburgh, 1995. ('onstruelion Management.

164