Unsustainability Risk of Bid Bonds in Public Tenders

Public works contracts are commonly priced and awarded through a tender process. Each bidder joining the tender must underwrite a bid bond that guarantees their fitness as contractors in case of a win. The winning contractor also needs to underwrite a performance bond before entering the contract to protect the procuring entity against the performance risk arising during the execution phase. This study addresses the case when sureties refuse to issue the performance bond, despite having issued a bid bond to the same subject. A creditworthiness variation of the contractor during the tender or an excessive discount of the contract’s price may lead to this outcome. In that case, all the subjects involved are damaged. The surety who issued the bid bond has to indemnify the procuring entity. The contract award is nullified, which is financially harmful to both the contractor and the procuring entity. We show that sureties adopting a forward-looking risk appetite framework may prevent the demand for unsustainable performance bonds instead of addressing it by rejecting the bidders’ requests. The Solvency II regulatory framework, the Italian bidding law, and actual historical data available from the Italian construction sector are considered to specify a simplified model. The probability of unsustainable tender outcomes is numerically estimated by the model, together with the mitigating impact of a surety’s proper strategy.

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The Impact of Terrorism on Construction Industry in Iraq

Wasit Journal of Engineering Sciences ◽

10.31185/ejuow.vol3.iss2.40 ◽

2015 ◽

Vol 3 (2) ◽

pp. 69-84

Author(s):

Wadhah Amer Hatem ◽

Samiaah M. Hassen Al-Tmeemy

Keyword(s):

Construction Industry ◽

Construction Projects ◽

Historical Data ◽

Terrorist Attacks ◽

Construction Sector ◽

Statistical Procedures ◽

Qualitative Approaches ◽

Suicide Attacks ◽

The Face ◽

The Impact

Suicide attacks, bombings, explosions became the part of daily life in Iraq. Consequently, the threat of terrorism put the Iraqi construction sector in the face of unique and unusual challenges that not seen on other countries. These challenges can have extensive impact on construction projects. This paper seeks to examine the impact of the terrorist attacks on construction industry and determine the extent to which the impact of terrorism on construction projects in terms of cost, schedule, and quality. This study adapted quantitative and qualitative approaches to collect data using questionnaire survey and interviews, as well as historical data. The study focused on projects that have been the target of terrorist strikes in Diyala governorate. A variety of statistical procedures were employed in data analysis. The results revealed the extent to which terrorist attacks impact construction projects in terms of cost, time, and quality. The results of this study will enhance the awareness of all construction parties to the impact of the terrorist attacks against construction projects. Eventually, this can develop a risk management assessment and assist contractors to properly protect projects and buildings to minimize injuries and fatalities in the event of terrorism.

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Development of Safety Cost for Architectural Works in Rental Apartments Building Construction Project Based on Work Breakdown Structure

International Journal of Engineering and Advanced Technology - Regular Issue ◽

10.35940/ijeat.e1003.0585c19 ◽

2019 ◽

Vol 8 (5C) ◽

pp. 16-27

Keyword(s):

Construction Project ◽

Rental Housing ◽

Health And Safety ◽

Building Construction ◽

Public Works ◽

Occupational Accidents ◽

Service Agency ◽

Construction Sector ◽

Work Breakdown Structure ◽

The Government

The government of Indonesia is targeting a supply shortage or housing backlog in 2019 to be 5.4 million. With the shortage of rental housing needs that are still very large, the development needs of rental flats in the future are still very high. But on the other hand, the implementation of construction projects in Indonesia, in general, the number of work accidents also increased. Referring to Labor Social Service Agency (BPJS) data, nationally the number of occupational accidents in the construction sector is recorded as the most national sector of the number of occupational accidents. Managerial finance is important to assist the process of making decisions related to work safety. While the regulations and provisions concerning occupational, health, and safety (OHS) financing in Indonesia in the construction sector, especially in buildings, have not been clearly and measurably regulated. In its implementation, the existing regulations have not been fully followed by construction actors even within the Ministry of Public Works and Public Housing itself. Architectural works on building construction, in this case, the construction of rental apartments is a job that has the highest number of work items compared to other types of work items. This study resulted in standardized Work Breakdown Structure, safety risks identification, mitigation risks and the component of safety cost for Architectural Works in Rental Apartments Building Construction Project.

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Loss portfolio transfer treaties within Solvency II capital system: a reinsurer’s point of view

Insurance Markets and Companies ◽

10.21511/ins.11(1).2020.01 ◽

2020 ◽

Vol 11 (1) ◽

pp. 1-10

Author(s):

Nicolino Ettore D’Ortona ◽

Gabriella Marcarelli ◽

Giuseppe Melisi

Keyword(s):

Cost Of Capital ◽

Solvency Ii ◽

Capital Requirements ◽

Point Of View ◽

Insurance Company ◽

Specific Level ◽

Collective Risk ◽

Risk Appetite ◽

Reinsurance Treaty ◽

The Cost

Loss portfolio transfer (LPT) is a reinsurance treaty in which an insurer cedes the policies that have already incurred losses to a reinsurer. This operation can be carried out by an insurance company in order to reduce reserving risk and consequently reduce its capital requirement calculated, according to Solvency II. From the viewpoint of the reinsurance company, being a very complex operation, importance must be given to the methodology used to determine the price of the treaty.Following the collective risk approach, the paper examines the risk profiles and the reinsurance pricing of LPT treaties, taking into account the insurance capital requirements established by European law. For this purpose, it is essential to calculate the capital need for the risk deriving from the LPT transaction. In the case analyzed, this requirement is calculated under Solvency II legislation, considering the measure of variability determined via simulation. This quantification was also carried out for different levels of the cost of capital rate, providing a range of possible loadings to be applied to the premium. In the case of the Cost of Capital (CoC) approach, the results obtained provide a lower level of premium compared to the percentile-based method with a range between 2.69% and 1.88%. Besides, the CoC approach also provides the advantage of having an explicit parameter, the CoC rate whose specific level can be chosen by the reinsurance company based on the risk appetite.

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Optimal allocation of model risk appetite and validation threshold in the Solvency II framework

The Journal of Risk Model Validation ◽

10.21314/jrmv.2018.193 ◽

2018 ◽

Author(s):

Liyi Lin ◽

Marc Heemskerk ◽

Peter Dekker

Keyword(s):

Optimal Allocation ◽

Solvency Ii ◽

Model Risk ◽

Risk Appetite

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Digital Twin for Maintenance Information Management

Advances in Civil and Industrial Engineering - Handbook of Research on Developing Smart Cities Based on Digital Twins ◽

10.4018/978-1-7998-7091-3.ch025 ◽

2021 ◽

pp. 575-601

Author(s):

Umberto Mecca ◽

Giuseppe Moglia ◽

Francesco Prizzon ◽

Manuela Rebaudengo

Keyword(s):

Private Sector ◽

Information Management ◽

Swot Analysis ◽

Facility Management ◽

Public Works ◽

European Countries ◽

Construction Sector ◽

The Public ◽

Effective Synthesis ◽

Inseparable Pair

BIM and the construction sector have long been an inseparable pair: in many European Countries it is a consolidated practice while in others there is a big debate about it but. Although there are important signs of a turning point, it still does not seem to be really feasible. In Italy, the leverage for transformation is certainly the public works sector, but this is not enough: to really talk about a whole digitization of the AEC sector, it is necessary to “attract” the private sector, where more than 50% of investments are invested. The chapter will attempt, starting from an Italian framework overview, to assess the main perceived obstacles of the applicability of a BIM model for facility management. The tool chosen by the authors as a preliminary approach to the problem, the SWOT analysis, allows an effective synthesis of the strengths and weaknesses resulting from such implementation.

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Efficiency and Integrity Issues in Public Procurement Performance

Journal of Public Finance and Public Choice ◽

10.1332/251569213x15664519748613 ◽

2013 ◽

Vol 31 (1) ◽

pp. 111-128 ◽

Cited By ~ 1

Author(s):

Ilde Rizzo

Keyword(s):

Empirical Investigation ◽

Public Procurement ◽

Poor Performance ◽

Public Works ◽

Monitoring Systems ◽

Implementation Phase ◽

Public Action ◽

Italian Case ◽

Execution Phase ◽

Ex Post

Abstract The paper offers an overview of some theoretical and empirical issues underlying the performance of public works contracts and outlines the connections between efficiency and integrity. It is stressed that performance strongly depends on the rules governing the various phases of the contract: because of the specific features of public works, the efficiency of open procedures to select the contractor is questioned and the relevance of the implementation phase for the outcome of public procurement is emphasized. Looking at the Italian case, some examples of empirical investigation on the performance of these contracts are provided and a discussion of the existing rules is offered. Costs overruns and delays, characterizing most public works contracts, are ‘red flags’ of poor performance and suggest that more attention should be given to the execution phase. A policy implication stemming from the analysis is that in Italy incentive schemes for procurement officers, to make them outcome-oriented rather than procedure-oriented, are needed: more discretion and responsibilities would call for adequate rewards and would require effective ex-post monitoring systems, also through benchmarking analyses. In this direction, standard costs need to be taken into consideration and implemented and, at the same time, a careful use of transparency is advocated to enhance accountability and to promote the integrity of public action.

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Tinjauan Atas Kesiapan Kementerian Pekerjaan Umum Dan Perumahan Rakyat Terkait Keikutsertaan Indonesia Dalam Government Procurement Agreement (GPA)

Veritas et Justitia ◽

10.25123/vej.2275 ◽

2016 ◽

Vol 2 (2) ◽

pp. 441465

Author(s):

Aryo Hestuleksono

Keyword(s):

International Law ◽

Market Access ◽

Government Procurement ◽

Public Works ◽

Construction Sector ◽

Foreign Companies ◽

Goods And Services ◽

The Government ◽

Construction Services ◽

The Relationship

AbstarctBasically ratification of the GPA for Indonesia is the opening of the Indonesian market (market access) to the entrepreneur/companies from other countries, which means allowing entrepreneur/foreign companies to participate in the process of procurement of goods and services (PBJ) government in Indonesia. Similarly, the reverse with Indonesian companies. The existence of market acess makes the relation between national with international law. This is a reason of authors are interested to know further the relationship conformity with international law related to the readiness of the national Ministry of Public Works and Public Housing (PUPR) when Indonesia ratified the GPA views of the setting methods for selecting/ auction in the construction sector in national legislation. The method used is a normative juridical research and the purpose of research to give recommendation to the Ministry PUPR particularly regarding setting methods for selecting the procurement of construction services when Indonesia ratified the GPA. If viewed from the side PBJ arrangements in the Government in the field of construction, especially regarding the purpose, principles and method of election of, the results showed that Ministry PUPR not ready when Indonesia ratified the GPA, because there is a difference between setting purpose PBJ contained in Perpres No. 54/2010 and its amendments as well as Permen PU No 07/2010 and amendments that more give protection to national companies, while GPA has the open principle. In addition there are differences about the method of selecting good views of the types/forms (nomenclature) and its meaning. So that when Indonesia will ratify the GPA, the Government and the Ministry PUPR in particular need to make adjustments to the "purpose" of regulation PBJ as contained in the Perpres/Permen PU with "purpose" contained in the GPA. Similarly, adjustments to the forms (nomenclature) and the meaning of the audition method.

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