The management of construction company overhead costs

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

doi:10.1016/S0263-7863(00)00011-9

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 journal › Article › peer-review

48 Scopus citations

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 language	English
Pages (from-to)	295-303
Number of pages	9
Journal	International Journal of Project Management
Volume	19
Issue number	5
DOIs	https://doi.org/10.1016/S0263-7863(00)00011-9
State	Published - Jul 2001

Bibliographical note

Funding Information:
The authors appreciate the support of the King Fahd University of Petroleum and Minerals during the course of the study. Thanks are also extended to the construction companies who participated in the study. Dr. Sadi Assaf is a professor of construction engineering and management at King Fahd University of Petroleum & Minerals (KFUPM) in Dhahran, Saudi Arabia. He holds a B.Sc. and Ph.D in Civil engineering from the University of Illinois and an MBA from Northern Illinois University. His main areas of research are quantitative methods in construction management, risk management in construction and life cycle costing Dr. Assaf has received distinguished and research awards from KFUPM Dr. Abdulaziz A. Bubshait is an associate professor of construction engineering and management at King Fahd University of Petroleum & Minerals (KFUPM) IN Dhahran, Saudi Arabia. He holds a B.Sc. form UPM and M.sc. and Ph.D in Civil Construction contract and administration, quality management, construction methods and pavement management. Dr. Solaiman Atiyah is an associate professor of accountancy at King Fahd University of Petroleum & Minerals (KFUPM) in Dhahran, Saudi Arabia. Mohammed Al-Shahri is a captain engineer in the Ministry of Defense, General Directorate of Military Works, Khamis Mushayt, Saudi Arabia.

Keywords

Administrative costs
Construction costs
Overhead cost
Saudi Arabia

ASJC Scopus subject areas

Business and International Management
Management of Technology and Innovation

Access to Document

10.1016/S0263-7863(00)00011-9

Cite this

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title = "The management of construction company overhead costs",

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.",

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note = "Funding Information: The authors appreciate the support of the King Fahd University of Petroleum and Minerals during the course of the study. Thanks are also extended to the construction companies who participated in the study. Dr. Sadi Assaf is a professor of construction engineering and management at King Fahd University of Petroleum \& Minerals (KFUPM) in Dhahran, Saudi Arabia. He holds a B.Sc. and Ph.D in Civil engineering from the University of Illinois and an MBA from Northern Illinois University. His main areas of research are quantitative methods in construction management, risk management in construction and life cycle costing Dr. Assaf has received distinguished and research awards from KFUPM Dr. Abdulaziz A. Bubshait is an associate professor of construction engineering and management at King Fahd University of Petroleum \& Minerals (KFUPM) IN Dhahran, Saudi Arabia. He holds a B.Sc. form UPM and M.sc. and Ph.D in Civil Construction contract and administration, quality management, construction methods and pavement management. Dr. Solaiman Atiyah is an associate professor of accountancy at King Fahd University of Petroleum \& Minerals (KFUPM) in Dhahran, Saudi Arabia. Mohammed Al-Shahri is a captain engineer in the Ministry of Defense, General Directorate of Military Works, Khamis Mushayt, Saudi Arabia. ",

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PY - 2001/7

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N2 - 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.

AB - 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.

KW - Administrative costs

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JO - International Journal of Project Management

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IS - 5

ER -

The management of construction company overhead costs

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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Cite this