American Journal of Applied Sciences 4 (12): 1084-1089, 2007 ISSN 1546-9239 © 2007 Science Publications Corresponding Author: Faridah Muhamad Halil, Faculty of Architecture, Planning and Surveying, 40450 University of Technology MARA, Malaysia 1084 Contractor’s Perception of the Use of Statistical Approach in the Tender Evaluation at the Public Works Department, Malaysia Faridah Muhamad Halil Faculty of Architecture, Planning and Surveying, 40450 University of Technology MARA, Malaysia Abstract: Contractor selection is one of the main activities of clients. Without a proper and accurate method for selecting the most appropriate contractor, the performance of the project will be affected. The usage of statistical method is implemented by Public Works Department as a better tool for the selection of suitable contractor. This method would avoid a personal preference during selection of contractor for government project. Furthermore, this method will ensure the price submitted by the tenderer is reflective of the current market conditions. The statistical method uses mean, standard deviation and coefficient variation and this has been applied via a computer program based on Microsoft Excel for ease of calculation. Previously the contractor selection process is based on the lowest price or as compared to the Quantity Surveyor’s estimate and this method exhibit an inherent weakness. Result from the survey questionnaire shows that the contractor agreed that the government has implemented a systematic approach using statistical method. Key words: Contractor selection, new method of selection contractor and analysis of variance INTRODUCTION Previously, the Public Works Department had adopted a where a capable tenderer was selected from selection of a contractor is largely based on the comparison between the tender received against the departmental estimate as a method to select a capable tenderer. This dependence on the departmental estimate to select a capable tenderer sometimes may not be fair due to the probability of inaccuracy of the estimate. This inaccuracy may be due to insufficient information or calculation errors [1] . To ensure that tender price is reasonable and in accordance to market price for tender acceptance, the Public Works Department introduced a method called the cut-off method. The cut-off price was based on a statistical method during tender to evaluate the bids submitted by the contractors. The tender price included the project cost estimated by the Department, i.e. departmental estimate. The cut-off method has been introduced at Public Works Department since 2002. The new method of selecting a contractor proposed by PWD is to determine and endorse the most economical bid and the most suitable contractor for award. Utmost important is to avert project implementation failure due to the contractor’s inability to undertake or complete the works. Therefore, a uniform set of guideline in selecting a contractor is essential to ensure that pricing and background of the bidder is thoroughly assessed and the best selected for award to ensure the successful implementation of the project. New Method of Selection Contractor Implemented by Public Works Department (PWD): The new method implemented by PWD is statistic based called the Cut-Off method. This method is used to shortlist the tenderer for further evaluation and normally implemented after the tender opening. A computer program based on Microsoft Excel is employed in the calculation of cut-off price for tender verification. The method employed in the computer program is based on the statistical mean, standard deviation, coefficient variation and frequency distribution. The formula used as follows; Cut-off price = Mean -1.18 x Standard Deviation Mean = Average for all tender price including department estimate. ( X/N) Standard deviation = NX2 – (X)2 N2 X= The total of tender price including department estimate N= The total numbers of tender received including department estimate CV= Standard deviation/ mean All the formula above has been used for selection of contractor during evaluation of tender. MATERIALS AND METHODS The questionnaire survey was undertaken to determine the opinion from contractor regarding the current tender evaluation practices in the Malaysia construction industry. A nine page questionnaire , accompanied by a covering letter, was sent to the Senior and Middle Management level which have knowledge in tendering procedure. The questionnaire