Intelligent agents for supporting construction procurement negotiation Ren-Jye Dzeng * , Yu-Chun Lin Department of Civil Engineering, National Chiao-Tung University, 1001 Ta-Hsieu Rd., Hsinchu 30050, Taiwan, ROC Abstract Negotiation is commonly required to reach a final contractual agreement in construction material procurement. However, even simple negotiations often result in suboptimal agreements, thus ‘leaving money on the table.’ An automated system that could evaluate bids, negotiate to finalize the bid, and value the individual characteristics of negotiating parties would be useful to both contractors and suppliers. This study examines common negotiable issues and options for construction material procurement, and presents an agent-based system, named C-Negotiators, that helps a contractor and suppliers to negotiate via the Internet. Genetic algorithm is used to find the most beneficial agreement for all parties, and web-based development is used to improve negotiation efficiency. Experiments also were conducted and demonstrated that C-Negotiators improved negotiation efficiency by saving negotiation time and cost, and improved negotiation effectiveness by suggesting a better agreement with higher joint payoff. Although the increase in payoff was smaller than expected, the improvement should increase for more complex negotiation problems involving more issues and options, or complicated preferences and for inexperienced negotiators. The application of the system is mainly limited by its symmetric optimization, while procurement negotiations in the construction industry are biased towards the contractor, and also by user comfort with their preferences and negotiations being monitored by the system. q 2003 Elsevier Ltd. All rights reserved. Keywords: Genetic algorithm; Intelligent agent; Procurement negotiation; E-commerce application 1. Introduction Most construction business processes rely heavily on traditional means of communication such as face-to-face meetings and the exchange of paper documents such as technical drawings, specifications, and site instructions. The construction industry has long recognized the need to increase the efficiency of these processes by exchanging large volumes of information quickly and cheaply (Deng, Li, Tam, Shen, & Love, 2001). As international competition continues to intensify, significant numbers of construction organizations are strategically investing heavily in infor- mation technology to gain competitive advantage (Betts, 1999). Various web-based collaboration platforms for project management and procurement have also been developed. One example is the PrimeContract developed by Primavera System Inc (Primavera System, 2003), which attempts to streamline intra-company and inter-company business processes, and supports project team communication, procurement, bid/auction, bid anal- ysis, and contracting. Construction material procurement is a key business where negotiation is commonly required to reach final contractual agreement. However, even simple negotiations often result in suboptimal agreements, thus ‘leaving money on the table’ (Raiffa, 1982). Based on Oliver (1996), while many factors lead negotiators to miss out on gains, falsely assuming fixed pies and the framing of the situation often cause parties to fail to reach mutually beneficial agreements. The challenge of negotiation arises partly from the fact that each side has private information about their own payoff function but is ignorant of the values and strategies of the other side. Exacerbating this situation is the negotiators’ incentive to misrepresent their preferences. For illustration, consider the following scenario: a general contractor has solicited several bid proposals from suppliers registered on a web-based construction procure- ment platform. Besides preferring a cheaper price, the contractor also prefers payment by usance check instead of cash to maintain cash flow level, and prefers delivery of materials in small consignments as required to avoid 0957-4174/$ - see front matter q 2003 Elsevier Ltd. All rights reserved. doi:10.1016/j.eswa.2003.12.006 Expert Systems with Applications 27 (2004) 107–119 www.elsevier.com/locate/eswa * Corresponding author. Tel.: þ 886-35733529; fax: þ 886-35745074. E-mail address: rjdzeng@mail.nctu.edu.tw (R.-J. Dzeng).