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Hence, the controlof the construction is improved.4.2. Project costIn practice, two approaches have evolved for organiz-ing construction work items to estimate project costs[29]. One approach is to identify work according tothe categories contained in the project s written specifi-cations, such as those of the Construction SpecificationInstitute (CSI) for building projects. The other approachemploys a work breakdown structure (WBS) to identifywork items by their location on the project. The devel-oped model is based on the CSI estimate format thatis commonly used in public construction projects in Tai-wan. Thus, the costs of a construction project are orga-nized according to four levels of estimates: (1) total bidprice; (2) level of project summary or bid summary. Thislevel summarizes various cost categories. Typical costcategories for a building project include direct costs,such as site-work excavation, concrete, equipment,mechanical, and other indirect costs, such as tax, insur-ance, and overheads (or profits); (3) cost item level (alsocalled the bill item or line item, and here simply termed‘‘item’’). Each cost category is subpided into smallercost items for particular construction processes. Forexample, the cost items for the second-level site-workexcavation cost category may be subpided into slurrywall, piling, finish grading, and so on. The cost of anitem equals the product of its unit price and quantity;(4) unit price level. A unit price is expressed as the costrequired to complete a unit of work associated with acost item, for example the cost of constructing a squaremeter of slurry wall. The term ‘‘cost item’’ here impliesthe cost item in the third level.4.3. Prerequisite of the modelThe proposed model depends on an electronic bid-ding process. The notice to bidders or general conditions(part of the bid package documents) must contain infor-mation concerning the rules of the model algorithms toensure that the model can be executed (that is, to beopen and fair while avoiding any disputes from bidders).The tender documents must also state that a biddershould submit his bidding package with an electronicspreadsheet file (such as Excel) of project cost estimates.A submitted bidding package without this completed filewill be disqualified.4.4. The modelAfter the lowest bid is found, the model is applied todetermine whether the bid price is reasonable. The de-tails of the model are illustrated as follows (see Fig. 1).First of all, if the lowest bid equals or exceeds 80% ofthe project ceiling price, then this lowest bid is consid-ered reasonable and the contract should be awarded tothe lowest bidder. Otherwise, this lowest bid should befurther evaluated. The reasons for using 80% as athreshold are: (1) eighty percent of the project ceilingprice is a commonly used reference to determine whetheran extra differential security bond should be providedin most construction projects in Taiwan. For example, suppose that the project ceiling price is $100 million andthe lowest bid is $70 million (bid ratio is 70%), then thelowest bidder must submit an extra bond of $10 million(80% of $100 million–$70 million) to the project owner;(2) using 80% as a threshold indicates that a bid exceed-ing the average bid ratio (about 0.79) of past projects inTaiwan is directly treated as reasonable.Preparation step – Then, if the lowest bid is viewed assuspicious (that is, bid ratio < 0.8), the preparation stepis performed to facilitate the bid assessments. Prepara-tion involves establishing an integrated file by combin-ing the unit prices from all parties (including theowner and the qualified bidders) into a single spread-sheet. Table 1 gives an example of the data found insuch an integrated spreadsheet file. In this integrated file,a differential ratio, Dj, for cost item j is defined:Dj ¼ðBj OjÞ=Oj; ð1Þwhere Bj and Oj denote the unit prices submitted by thelowest bidder and owner, respectively, for cost item j.Apositive Dj implies that the unit price submitted by thelowest bidder exceeds that assessed by the owner, andvice versa. A higher positive or lower negative value ofDj indicates a greater difference between Bj and Oj.Notably, in Table 1, dollar values are represented inNew Taiwan (NT) dollars (1 US dollar @ 30 New Tai-wan dollars). Subsequently, dollar values are expressedin NT dollars.Evaluation step – Next, the evaluation step is executedto examine whether the unit prices submitted by the low-est bidder are reasonable. Specifically, based on the cal-culated differential ratio of each cost item, each unitprice (Bj) submitted by the lowest bidder is assessed to determine which of the following three categories it fallsinto: Reasonable unit price – If r1 6 Dj 6 r1,(r1 denotes aconstant between 0 and 1 or a percentage between 0%and 100%), then Bj is reasonable. Namely, if the dif-ference (percentage difference) between the unit pricesprovided by the lowest bidder and the owner fallswithin a specified range, then Bj is directly consideredreasonable. For example, a value of 0.3 (or 30%) forr1 indicates that Bj is reasonable if 0.3 6 Dj 6 0.3.Restated, Bj is acceptable if it lies between 0.7 Ojand 1.3 Oj. Suspicious unit price – If r2 6 Dj < r1 orr1 < Dj 6 r2, then Bj is suspicious. Notably, r1 < r2for example, r1 = 0.3 and r2 = 0.4. Namely, Bj is sus-picious because it is slightly low, but not too low(such as, 0.4 6 Dj < 0.3); or it is slightly high,but not too high (such as, 0.3 < Dj 6 0.4). Unreasonable unit price – If Dj < r2 or r2 < Dj,then Bj is directly deemed unreasonable. Restated,Bj is not classified into either the reasonable or thesuspicious unit price is unreasonable.The values r1 and r2 are used to help identify reason-able, suspicious and unreasonable unit prices.