The management of construction company overhead costs

Sadi A. Assaf, Abdulaziz A. Bubshait*, Sulaiman Atiyah, Mohammed Al-Shahri

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

33 Citations (Scopus)

Abstract

This paper investigates the overhead cost practices of construction companies in Saudi Arabia. Although overhead costs are extremely important in construction estimation, they can be easily overlooked. Neglecting overhead has forced some contractors out of business, because these costs constitute a significant portion of the total construction cost. The practices of 61 large building construction contractors were investigated via questionnaire. The questionnaire has three parts covering the construction firms, overhead costs in general, and company overhead costs. Results show that average overhead cost is slightly higher than the ratio reported in the literature. The average percentage of company overhead costs to project direct cost is greater than 10%. Causes of increased company overhead costs include delayed payments, shortage of new projects, cost of inflation and governmental regulations. Factors affecting company overhead costs include the following: automobile and equipment costs, head office expenses, labor related costs and financing costs. The unstable construction market makes it difficult for contractors to decide on the optimum level of overhead costs that enables contractors to win and efficiently administer large projects.

Original languageEnglish
Pages (from-to)295-303
Number of pages9
JournalInternational Journal of Project Management
Volume19
Issue number5
DOIs
Publication statusPublished - Jul 2001
Externally publishedYes

Keywords

  • Administrative costs
  • Construction costs
  • Overhead cost
  • Saudi Arabia

ASJC Scopus subject areas

  • Business and International Management
  • Management of Technology and Innovation

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