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Investigating the overhead costs in construction projects in Palestine

Investigating the overhead costs in construction projects in Palestine Purpose – This paper aims to investigate the overhead costs of construction contractors at the Gaza Strip, Palestine, specifically the level of contractors' awareness of the concept of overhead cost, their perception of main components of overhead cost, percentage of overhead to total project cost, method used to manage and control overhead cost, and reasons for increasing overhead cost. Design/methodology/approach – In the research 40 contractors classified under the Palestinian Contractors Union (PCU) and United Nation Relief Works Agency (UNRWA) list were surveyed. Findings – The findings indicate that the majority of contractors are aware of overhead costs in construction projects. The staff wages are the highest overhead costs component. The currency exchange rates, inflation, increase in financial costs among others lead to increase in overhead costs. The findings illustrate that the overhead costs are on average 11.1 percent of the total project cost. Controlling and managing overhead costs are considered the main tools to improve the companies' financial situation. Practical implications – The trend in most companies is to adopt techniques to manage and control their cost components. Using activity based costing (ABCs) is one of the main techniques which the companies should take into consideration. The contractors' knowledge and awareness of the research finding will increase their chances of winning bids within an acceptable profit margin. Applied training courses are recommended for contractors to improve their awareness regarding the importance of overhead costs. Originality/value – This study will extend contractors' awareness and knowledge through guidance on how to gear their financial resources carefully, and how to bid correctly in order to remain competitive in the market place. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Management of Property and Construction Emerald Publishing

Investigating the overhead costs in construction projects in Palestine

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1366-4387
DOI
10.1108/13664380810882066
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to investigate the overhead costs of construction contractors at the Gaza Strip, Palestine, specifically the level of contractors' awareness of the concept of overhead cost, their perception of main components of overhead cost, percentage of overhead to total project cost, method used to manage and control overhead cost, and reasons for increasing overhead cost. Design/methodology/approach – In the research 40 contractors classified under the Palestinian Contractors Union (PCU) and United Nation Relief Works Agency (UNRWA) list were surveyed. Findings – The findings indicate that the majority of contractors are aware of overhead costs in construction projects. The staff wages are the highest overhead costs component. The currency exchange rates, inflation, increase in financial costs among others lead to increase in overhead costs. The findings illustrate that the overhead costs are on average 11.1 percent of the total project cost. Controlling and managing overhead costs are considered the main tools to improve the companies' financial situation. Practical implications – The trend in most companies is to adopt techniques to manage and control their cost components. Using activity based costing (ABCs) is one of the main techniques which the companies should take into consideration. The contractors' knowledge and awareness of the research finding will increase their chances of winning bids within an acceptable profit margin. Applied training courses are recommended for contractors to improve their awareness regarding the importance of overhead costs. Originality/value – This study will extend contractors' awareness and knowledge through guidance on how to gear their financial resources carefully, and how to bid correctly in order to remain competitive in the market place.

Journal

Journal of Financial Management of Property and ConstructionEmerald Publishing

Published: Jun 30, 2008

Keywords: Estimation; Overhead costs; Profit; Palestine; Construction industry

References