Evaluation of the Competitiveness of Construction Company Overhead Costs

Abstract

Abstract. The enhancement of the competitiveness of a construction company is one of the most important strategic objectives in construction industry. The company's management system, work organization and employment of available assets are some of the most important factors upon which overhead costs and the bidding price of a construction company depend directly. A statistical analysis of a homogenous group of construction companies reveals the company's overhead costs value distribution function, which can be used to evaluate the competitive advantages and disadvantages of a specific construction company. A detailed overhead costs categorization and the findings of a survey conducted among contractors influenced the selection of the principal parameters of the company's activity, on which the value of overhead costs depends; they are the number of company's head office employees and the area of company's facilities. The developed competitiveness evaluation methodology enables the construction managers to adequate and scientific position the company on the market of homogenous construction companies group, to estimate its activity as well as to evaluate the competitive advantages and disadvantages of bidding prices and certain costs in public tendering of construction operations and services.

Marketing Management Functions of Construction Companies: Evidence From Turkish Contractors

“…Price: Contractors are often compelled to offer the lowest price in order to achieve competitive advantage against their rivals as the hit-rate in competitive bidding is predominantly determined by how low a contractor can bid relative to other bidders in the traditional contracting environment (Nassar 2003;Skitmore and Smyth 2007;Arditi et al 2008;Šiškina et al 2009;Plebankiewicz 2009). Thus, price is the most important basis for differentiation amongst contractors.…”

“…Second, the hit-rate in competitive bidding is predominantly determined by how low a contractor can bid relative to other bidders (Šiškina et al 2009;Plebankiewicz 2009), so contractors often neglect marketing activities (Nassar 2003;Skitmore and Smyth 2007;Arditi et al 2008). Besides, some marketing activities such as organizing social events, providing client entertainment, etc.…”

Relationship between behavior of contractors in tenders and attributes of firms

“…Possibility of the bid success is examined according to these factors (Mochtar and Arditi, 2001;. Control of overhead costs can give the contractor firms a competitive edge as well (Siskina et al, 2009). There are some other risks that may arise from unexpected condition or may be related to companies (such as, bad management of the project, the technical failure of contractor, inexperience, and excessive work load).…”

List of Abbreviations xvii

“…Project price usually includes Value Added Tax (VAT), income tax, and all other construction cost components such as materials, labour, contingency, profits, and overheads (Aretoulis et al, 2006;Giammalvo, 2007 andand Šiškina et al, 2009). Taxes are normally related to government agencies and regulations.…”

“…Cost overruns in construction projects must be prevented, and eventually have to be run under budgets to help avoiding any financial losses. The project contract price should recover all components of project costs such as materials, labour, contingency, overheads, and extra profits for the contractor (Aretoulis et al, 2006;Giammalvo, 2007 andand Šiškina et al, 2009 …”