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EVALUATION OF THE COMPETITIVENESS OF CONSTRUCTION COMPANY OVERHEAD COSTS

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The enhancement of the competitiveness of a construction company is one of the most important strategic ob- jectives in construction industry. The company’s management system, work organization and employment of available as- sets 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 spe- cific construction company. A detailed overhead costs categorization and the findings of a survey conducted among con- tractors 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 devel- oped 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 opera- tions and services.
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JOURNAL OF CIVIL ENGINEERING AND MANAGEMENT
2009
15(2): 215–224






EVALUATION OF THE COMPETITIVENESS OF CONSTRUCTION
COMPANY OVERHEAD COSTS
Ala Šiškina1, Arvydas Juodis, Rasa Apanavi?ien 2
Dept of Civil Engineering Technologies, Kaunas University of Technology,
Student? g. 48, LT-51367 Kaunas, Lithuania,
E-mail: 1ala.siskina@ktu.lt; 2rasa.apanaviciene@ktu.lt
Received 24 Nov 2008; accepted 09 Feb 2009
Abstract. The enhancement of the competitivenes of a construction company is one of the most important strategic ob-
jectives in construction industry. The company’s management system, work organization and employment of available as-
sets 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 spe-
cific construction company. A detailed overhead costs categorization and the findings of a survey conducted among con-
tractors 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 of ice employe s and the area of company’s facilities. The devel-
oped competitivenes 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 wel as to evaluate the
competitive advantages and disadvantages of bidding prices and certain costs in public tendering of construction opera-
tions and services.
Keywords: competitivenes , overhead costs, management system, optimization strategies.

1. Introduction
location. Its competitive ability can be evaluated in terms
The enhancement of the competitiveness of a construc- of its competitive price, quality, supplementary services
tion company is one of the most important strategic tasks and other factors. However, the essential factor of a con-
in construction industry. The chal enge to win in the struction company’s competitiveness is bidding price,
competitive bat le has become essential in modern busi- since it is the main criterion for the clients in selecting
ness, while the dynamical y growing competitive envi- contractors (Turskis 2008; Zavadskas et al. 2008b, Mit-
ronment forces the companies to pay more and more kus and Trink?nien 2008).
at ention to the implementation of marketing practices
Competitive advantages of construction bidding
(Ja far et al. 2008) and the development and adaptation price can be obtained in two ways, i.e. by model ing di-
of ef icient strategies for the construction company’s rect and indirect costs. Overhead costs represent the larg-
development. This aims at preserving the company’s est part of indirect costs. The estimation of overhead
positions in a specific part of the market and applying its costs is a key task in the calculation of construction costs
competitive advantages on the regional market. The of specific work packages as wel as that of the entire
strategies for construction companies’ development are project, since they comprise a significant part in the con-
basical y aimed at 2 main goals, i.e. increasing their com- struction estimate. However, building contractors often
petitiveness and expanding construction market share fail to evaluate the actual overhead costs adequately,
(Juodis 2001). In marketing sources the competitiveness which lead to financial losses or even bankruptcy of the
of a company is defined as the ability to adapt to volatile construction company.
market competition conditions (Kuvykait 2001). Conse-
The only way to increase the company’s competi-
quently, the ability of a company to operate in a competi- tiveness under highly intense competition in construction
tive environment is one of the most important features of market with declining building contractors profits and
ef icient management.
shrinking market shares is to control the costs of produc-
The development of competitiveness involves the tion and business. In an environment of fre market
identification of its factors and their appearance circum- economy the management of company’s expenses consti-
stances (Rutkauskas 2008). The positioning of a construc- tute a starting point for suc ess; thus it is very important
tion company in the market is directly dependent on 3 for managers of construction companies not only to con-
essential competitiveness at ributes, i.e. the size of a con- trol, but also to forecast the expenses due to the manage-
struction company, field of its activities and its regional ment of competitive advantages formation process. The
JOURNAL OF CIVIL ENGINEERING AND MANAGEMENT
ISSN 1392–3730 print / ISSN 1822–3605 online
215
http:/www.jcem.vgtu.lt
DOI: 10.3846/1392-3730.2009.15.215-224

216
A. Šiškina et al. Evaluation of the competitivenes of construction company overhead costs
issues of a construction company’s competitiveness arise 2003). General overhead costs (home-of ice expenses)
constantly during the preparation of construction bids and are intended to include al those expenses incur ed by the
participating in public tenders. An inappropriate evalua- home office that cannot be tied directly to a given project
tion of overhead costs may bring about either too high or such as home-office building rental, clerical or utilities.
too low overhead costs, which, in turn, may undermine These costs are distributed over al company projects by
the competitiveness of building contractors, or may even some basis.
force some construction companies out of business. A
A construction company’s overhead costs directly
proper evaluation of overhead costs is a problem relevant reflect its management system, organization of com-
to building contractors; therefore, this paper studies the pany’s activity and use of its available assets and facili-
issues of competitiveness of a construction company’s ties. The structure of overhead costs, adopted in Lithua-
overhead costs.
nia, is shown in Fig. 1. It is quite strictly defined;

therefore, it is possible to select adequate criteria and
2. Overhead costs definition
parameters which al ow to analyse the construction com-
A few commonly ac epted definitions of overhead costs pany’s competitiveness in the market in terms of its over-
appear in scientific sources worldwide. One of them head costs as wel as evaluate the ef iciency of the com-
states that an overhead cost can be defined as a cost that pany’s management system.
cannot be identified with or charged to a construction
It is obvious, that if a contractor does not know his
project or to a unit of construction production (Coombs, actual overhead costs, an unsuc essful ef ort to cover the
Palmer 1989). Another definition describes overhead company’s overhead costs may result in financial col-
costs as those costs that are not a component of the actual lapse of a construction company. The unstable construc-
construction work but are incur ed by the contractor to tion market makes it dif icult for contractors to decide on
support the work (Cilensek 1991). General y, the building the optimum level of overhead costs that enable contrac-
contractor’s overhead costs are divided into 2 categories: tors to win public tenders and to manage large projects
project overhead costs and company’s overhead costs without financial losses (Assaf et al. 2001).
(Peurifoy, Oberlander 2002). Project overhead costs in-

clude items that can be identified with a particular job, 3. Overhead costs research review
but are not materials, labour, or production equipment. Overhead costs of a company are an important research
Job overhead includes expenses that cannot be charged object for construction economics
directly to a particular branch of work, but are required to
scientists and analysts.
Relevant researches on overhead costs have been car ied
construct the project (Dagostino, Feigenbaum 2003). out for several decades; they investigate a lot of dif erent
Company overhead costs are also cal ed general overhead problems related to the evaluation of the company’s and
costs. These are items that represent the cost of doing project overhead costs, their al ocation to dif erent pro-
business and often are considered as fixed expenses that jects, specific jobs or other cost centres, actual overhead
must be paid by the contractor (Dagostino, Feigenbaum costs coverage and numerous other factors.


Construction price
Direct costs
Overhead costs
Risk and profit
Head of ice expenses, building


Social security, taxes and
rental, clerical or utilities,
Common use automobi-
Head office staff wages
insurance fee from head
proceeding taxes and fees
les expenses
office staf wages
Infrastructure and Management System of a Construction Company
Number of company’s
The size of construction com-
Other parameters
head office personnel
pany’s facilities
of management infrastructure

Fig. 1. The structure of a construction company’s overhead costs



Journal of Civil Engine ring and Management, 2009, 15(2): 215–224
217
Al research works on overhead costs evaluation can cated to work divisions in proportion to direct labour
be divided into 4 main research trends:
hours or direct labour costs.
? Construction contractor surveys, analysis of situa-
Nevertheless, these traditional methods are often
tion and statistical research on understanding the criticised for cost distortion and the lack of relevance as
overhead costs concept as wel as categorization of overhead costs are analysed as a whole; and when assign-
indirect costs, the implementation of evaluation, ing them to work divisions the susceptibility for com-
planning and control in practice;
pany’s indirect activity is not taken into consideration.
These factors are evaluated using the so-cal ed ABC
? Analysis of construction delays vs. overhead costs
volume;
method (Activity-based costing). In this case cost distor-
tion is prevented by adopting multiple cost drivers, i.e.
? Analysis of the construction company’s overhead
costs distribution and al ocation;
actual operational and process costs are determined. A
further field in this group of research is the development
? Analysis of fixed expenses recovering.
Research papers in the first group reflect the over- of new overhead costs al ocation methods or the im-
head costs evaluation and management experience of provement of those already available, in regard to the
construction contractors from various countries. Scien- evaluation of their advantages and disadvantages.
tists car y out contractor surveys and statistical analysis
The fourth group of research in the field of overhead
of the results in order to determine whether construction costs involves the analysis of fixed costs evaluation and
contractors correctly understand the definitions of indi- recovering. This trend of research is mostly car ied out in
rect and overhead costs as wel as whether appropriate German speaking countries. For several decades these
costs evaluation methods and costs al ocation techniques issues have received exclusive at ention of the researchers
are applied.
(Schif ers 1979). German scientific publications discuss
A research car ied out in the USA revealed that over the situation in the construction market as unfavourable
60% of the construction contactors responding to survey for contractors and the ne d for applying a market-based
cannot adequately determine the definition of overhead estimation system (Sehlhof 2003). The ne d of market-
costs (Holland, Hobson 1999). Overhead costs depend on oriented practices of the enterprises is also emphasized by
the size of a company; consequently, about 80% of the Lithuanian researches (Ginevi?ius 2007; Ginevi?ius and
companies surveyed indicate dif erent overhead costs Podvezko 2008). Cur ent price determination methods
categorization. Only 50% of contractors analyse and up- widely used by German contractors are cost-oriented and
date their overhead costs’ records annual y, and about are based on evaluating indirect costs ac ording to the
70% change them for various projects in order to win productivity of the company. Construction companies are
public tenders. Similar tendencies are being observed in advised to use the so-cal ed contribution margin ac ount-
Europe, Asia (Chan, Le 2003) and Middle East coun- ing, which provides the categorization of contractor’s
tries (Assaf et al. 2001).
costs into variable and fixed, and is a very ef icient tool
Research in the second group involves the impact of for cost planning (Meinen 2005).
construction project delays on the company’s overhead
costs refund and its operational ef iciency. In such cases
the construction company does not suf er financial losses
Profit
directly, but the recovering of overhead costs from com-
Fixed costs cove-
Loss
pany’s income planned by contractor is undermined
red by income
Fixed costs cove-
(Ta m, Singh 2003). In such cases the contractor person-
red by incomes
al y has to refund unabsorbed overhead costs for a certain
period, by which the execution of construction is delayed.
Eichlay formula or its modified versions are used to iden-
Variable costs
Variable costs
tify and evaluate company’s unabsorbed overhead costs.
Researches in the third group involve the analysis
and evaluation of company’s overhead costs distribution
Fig. 2. Fundamental principles of contribution margin ac-
methods and al ocation techniques. Such scientific re-
counting
searches are particularly essential for large companies

Contribution margin ac ounting (break-even analy-
that work in the field of construction project management sis) is a cost determination system, when construction
and coordinate the work of numerous subcontractors costs within a given ac ountable period are divided into 2
(Kim, Bal ard 2002). Traditional y, company’s overhead main groups: operational execution dependent (variable)
costs are distributed to dif erent projects ac ording to costs and company reserve maintaining (fixed) costs.
resource-based costing and volume-based al ocation Fig. 2 il ustrates the fundamental principles of contribu-
(Kim, Bal ard 2001). Resource-based costing is the tion margin ac ounting. This method is based on estab-
method of overhead costs al ocation to cost objects in lishing the margin, which is considered the dif erence
which costs are assigned by each resource, and volume- between the revenue and variable expenses, and is meant
based al ocation is the method in which costs are al o- to cover fixed costs and profit.


218
A. Šiškina et al. Evaluation of the competitivenes of construction company overhead costs
1. Analysis of overhead costs competitivenes limits of construction companies
2. Evaluation of construction company overhead costs competitivenes
Are construction company overhead
YES
costs competitive?
NO
3. Analysis of construction company’s management system and
infrastructure parameters
4. Selection of construction company’s overhead costs optimization strategies
End

Fig. 3. Scheme of evaluation of the competitivenes of construction company overhead costs
This paper presents a relevant modern methodology
The discussed set of companies belongs to the mid-
al owing to evaluate the position of a specific construc- sized company group. These companies employ from 20
tion company in the existing market ac ording to the to 250 employe s, and their annual volume of construc-
company’s overhead costs competitiveness at the stage of tion operations ranges from 0.9 to 21.8 mil ion Lt. The
bidding and public tenders.
management staf in the examined companies ranges

from 3 to 24 employe s, the size of buildings facilities is
4. Methodology for evaluating the competitiveness of
from 168 to 2000 m2, and the annual overhead costs
construction company overhead costs
range from 1.0 to 1.36 mil ion Lt.
The analysis of the construction company’s overhead
Ac ording to the Lithuanian certified recommenda-
costs competitive advantages involves the following pro- tions for construction cost estimation, a company’s over-
cedures: the analysis and evaluation of the overhead costs head costs consist of head office expenses, building
competitiveness limits on the market of existing construc- rental, clerical, utilities, automobiles expenses, head of-
tion companies; evaluation of a certain construction com- fice staf wages and their social security taxes and fe s.
pany overhead costs competitiveness on this market, Ac ording to this categorization of overhead costs, they
analysis of construction company’s management system were divided into more detailed overhead costs subdivi-
and infrastructure items, selection of strategies for over- sions and included in the contractors’ survey question-
head costs optimization. The scheme of construction naire.
company competitiveness evaluation method is in Fig. 3.
Since the amount of a construction company’s over-
The primary and most important task in determining head costs reflects its management system and infrastruc-
a competitive amount of a construction company’s over- ture, the questionnaire also contains additional questions
head costs is the analysis of overhead costs of rival com- about the volume of the construction operations executed,
panies and determination of their overhead costs limits on size of management apparatus and structure as wel as
the market.
size of company’s realty.
The overhead costs of a construction company were

divided into 3 main parts:
4.1. Survey and construction overhead costs data
analysis
? Head office personnel expenses, depending on the
number of head office employe s;
The overhead costs competitiveness of a construction
company can only be determined after researching the
? Expenses for the maintenance of buildings and
premises, depending on the size of buildings facili-
market of construction works and services. A question-
ties;
naire has been prepared and a survey of construction
contractors was car ied out. A thre -year data from 30
? Other overhead costs, depending on numerous factors.
construction companies performing general construction
The overhead costs of a construction company re-
work packages in the central region of Lithuania’s con- flect its management system and infrastructure expenses;
struction market was gathered. The size, structure and thus, the magnitude of overhead costs directly depends on
the company size. Therefore, in further analysis and
operational volume of these companies are analogous; processing of statistical data, relative values of the calcu-
therefore, the set of the companies responding to survey
is considered to be homogenous.
lated overhead costs, administration costs and building
maintenance costs were used. These relative values are
parts of costs per unit of operation volume.


Journal of Civil Engine ring and Management, 2009, 15(2): 215–224
219
4.2. Evaluation of the competitiveness of construction
inef icient business infrastructure or inappropriate man-
company overhead costs
agement system. In this case it is imperative to reform the
The evaluation of a construction contractor’s competi- management system and/or infrastructure of the company
tiveness is car ied out ac ording to the competitive situa- by implementing specific reorganization, shake-up or
tion on construction market. In this research mathemati- other company’s development strategies.
cal statistics was applied to perform the analysis of the
Research of overhead costs competitiveness alone is
construction contractors’ survey results. The main statis- often not suf icient for evaluating a company’s manage-
tical characteristics of the relative values of a construc- ment ef iciency; thus, a thorough and sectional analysis
tion company’s overhead costs as wel as their probability of overhead costs components is necessary. The data
distribution, which is used to compare company’s over- gathered during the survey of construction contractors
head costs with the existing in construction market, were al ows to car y out the statistical analysis of overhead
determined. After testing the compatibility hypothesis costs’ elements as wel as to set the competitiveness lim-
about the normality of distribution by means of the Kol- its of the administration and building facilities’ costs
mogorov-Smirnov and Chi squared criteria, it was esti- under the construction market conditions. The results of
mated that the relative values of a construction com- the construction contractor survey reveal that the amount
pany’s overhead costs distribute in compliance with the of the third part of overhead costs is rather smal com-
normal law. This al owed the consistencies of normal pared to the administration and building facilities’ costs
distribution to be used in the process of overhead costs and can be interpreted as a fre member in a regression
data analysis. In this way it became possible to evaluate equation.
competitiveness of a specific construction company’s
The competitive advantages and disadvantages of a
overhead costs.
construction company’s administration costs in the given
The analysis of a company’s overhead costs com- market are evaluated by the same methodology applied to
petitiveness begins with determining the relative values, determine the competitiveness of general overhead costs
i.e., the portion of overhead costs per unit of the executed of a company. The group of administration costs includes
construction volume. This value is compared with those the following:
of other companies operating on the market; in this way
? head office staf wages;
the conclusions about the company’s overhead costs
? social insurance taxes;
competitiveness are made.
? administrative expenses (mail, communications, of-
fice, business trips, transport and other expenses).

The relative value of administrative costs is a key
parameter, describing the ef iciency of the business struc-
ture and management system of a construction company.
Fig. 5 il ustrates obtained administration costs distribu-
tion in the construction market for the evaluation of a
construction company’s competitiveness.



Fig. 4. Distribution of construction company overhead
costs relative values

The competitiveness of a construction company can
be evaluated ac ording to the distribution, gained from
data analysis (Fig. 4). If the value of a company fal s

within the interval betwe n the lowest and the average

overhead costs relative values of the market, it means that
Fig. 5. Distribution of construction company administra-
the overhead costs are competitive and the company op-
tion costs relative values
erates ef iciently, it has a rational structure of both –

business and buildings’ facilities as wel as a proper man-
If the relative value of a given construction com-
agement system. If the value of the company fal s within pany fal s within the interval between the lowest and the
the interval betwe n the average and the highest overhead average relative values of administration costs, its ex-
costs relative values of the market, it is not competitive in penses are competitive and business structure is strategi-
terms of overhead costs. This might mean that it has an cal y appropriate for business under the conditions of
existing market. If the relative value of a given construc-


220
A. Šiškina et al. Evaluation of the competitivenes of construction company overhead costs
tion company fal s within the interval betwe n the aver- head costs groups requires minimization, a favourable
age and the highest relative values of administration value of management system parameter for enhancing the
costs, the company uses its resources inef iciently. In this company’s competitiveness is determined and adequate
case it is necessary to apply specific restructuring, reor- company development strategies are selected. The num-
ganization or other development strategies.
ber of head office employe s influences the company’s
Another important parameter for the analysis of the business structure and overal formation of the manage-
ef iciency of a construction company’s management is ment system, while the facilities size influences the struc-
the size of the realty owned. The buildings facilities costs ture of buildings and their use. The equations of the de-
group consists of:
pendence between the overhead costs and company’s
? costs for buildings amortization;
management system parameters are obtained by means of
the correlation-regression analysis of the construction
? exploitation and repair expenses;
contractors’ survey results.
? rent;

? insurance;
4.3. The influence of construction company infrastruc-
? lighting;
ture parameters on the value of overhead costs
? heating;
? plumbing;
The influence of a construction company’s infrastructure
? sewage disposal;
parameters on the value of overhead costs is determined
by applying the multifactor correlation and regression
? ac ommodation cleaning;
model, while in the case of the overhead costs compo-
? other expenses.
The relative value of buildings facilities costs is ana- nents, the single-factor correlation and regression analysis
lysed in the same way as the relative values of the general was applied.
overhead costs. Fig. 6 il ustrates obtained distribution of
The dependences between the relative value Pr of
building facilities costs in regard to the evaluation of a overhead costs in a construction company and the relative
construction company’s competitiveness. Relative values values of the following management parameters are in-
below the average in the market mean, that the buildings vestigated:
facilities of the company are used ef iciently; conse-
quently, it has competitive advantages in the existing
? number of administration staf Sk ;
market. Values above the average of relative values sig-
? building facilities’ area Pl ;
nal the company managers that the real estate of the com-
? size in volume units T .
pany is used inexpediently; moreover, both the structure
The influence of these parameters on the value of
and use of the company’s facilities require reorganiza- the overhead costs is determined by the multifactorial
tion.
correlation-regression analysis. In ac ordance with the
structure of overhead costs adopted in Lithuania and the

findings of the construction contractors’ survey, the con-
clusion can be made, that the influence of other com-
pany’s management parameters and factors are not rele-
vant to the costs and this part of overhead costs can be
assessed by a fre member of a regressive equation.
It was determined statistical y that the relative val-
ues of a company’s overhead costs and the number of
administration employe s have a strong linear correla-
tion – correlation coef icient r = 0.599. Furthermore, the
relative value of company’s overhead costs and relative
values of buildings area also have a strong linear correla-
tion r = 0.701, as wel as one of the relative value of
company’s overhead costs and relative values of build-
ings volume r = 0.673. The relative values of the com-
pany buildings area and size in volume correlate too, r =
0.950; therefore, based on Pearson and Spearman’s corre-

Fig. 6.
lation rank coef icient, only one characteristic - the rela-
Distribution of construction company building fa-
cilities’ costs relative values
tive value of the company buildings area was chosen for

further research, as shown in Fig. 7.
The evaluation of a construction company’s over-
After the multifactorial correlation-regression analy-
head costs or their separate elements (administration and sis the following regression equation was obtained:
buildings facilities costs in terms of the competitiveness
Pr 36107 14958 Sk 197 Pl
=
+
? +
? .
(1)
in the market) poses a few questions concerning the im-
The multifactor regression model of overhead costs
plementation of measures for increasing the competitive- is shown in Fig. 8. Ac ording to the adequacy research of
ness. The value of overhead costs is influenced by values the regression model, the conclusion can be made, that
of specific parameters, which can be derived from their the multifactorial linear regression model adequately
dependency equations. Depending on which of the over- describes the relation betwe n the company’s overhead


Journal of Civil Engine ring and Management, 2009, 15(2): 215–224
221
correlate, in ac ordance with Pearson and Spearman’s
correlation rank coef icients, only one characteristic was
chosen for further research - the relative value of build-
ings and premises area Pl, per one mil ion Lt of the com-
pany’s construction volume.
By applying the single-factor correlation-regression
analysis, the following regres ion equation was obtained:

Pas
69
.
667
62
.
17
Pl
=
+
? .
(2)
Fig. 9 il ustrates the linear regression model of
buildings’ facilities costs. The adequacy research of the
regression model reveals that obtained model of linear
regression adequately describes the relation betwe n the
relative values of the company building facilities’ costs
and area. This model can be applied in practice to fore-
cast the costs of the company-owned facilities.



Fig. 7. Diagram of data dispersion



Fig. 9. Linear regres ion model of relative values of
buildings’ facilities costs


Similarly, the relation between the number of the
Fig. 8. Multifactor linear regres ion model of overhead
construction company’s management staf and admini-
costs relative values

stration costs was analysed. This required statistical proc-
costs, number of administration staf and relative values essing the relative values of the analysed variables and
of the company’s owned real estate area. This model can use of the single-factor correlation-regression analysis.
be applied in practice to forecast the value of overhead The determination coef icient 2r= 0.292 revealed, that
costs depending on dif erent ef iciency values of a con- the obtained regression model does not describe the rela-
struction company.
tion betwe n the company’s administration costs and the
Methods for minimizing the overhead costs are cho- number of employe s properly. To improve the regres-
sen individual y for every construction company, in rele- sion model a new variable – the relative value of the gen-
vance to its actual operational conditions.
eral number of company’s employe s DSk was added to
In further analysis it is not suf icient to know the re- the model. In further analysis a multifactorial linear re-
lation betwe n the general overhead costs and selected gression model was applied. Upon ac omplishing the
parameters, which impact the ef iciency of the company’s correlation-regression analysis, the following regression
management system; therefore, their influence on specific equation was obtained:
overhead costs groups – administration costs and building
Adm 30543 7832 Sk 1582 DSk .
(3)
facilities‘ expenses are analysed separately.
=
+
? +
?
The influence of the company building facilities‘
Verification of the regressive model of administra-
expenses is obtained by means of the single-criteria cor- tion costs has determined, that the obtained linear regres-
relation-regression analysis. The real estate value of a sion model (Fig. 10) adequately describes the existing
construction company can be described by 2 parameters – correlation between the relative values of the number of
the area and the size of the real estate and premises. company’s administration staf , the number of al em-
However, since these relative costs‘ values strongly ploye s of a company and administration costs.



222
A. Šiškina et al. Evaluation of the competitivenes of construction company overhead costs
? Exact job assignment;
? Redistribution of employe workload flow;
? Strong subordination and ac ountability;
? At raction of high qualification professionals; other
strategic solutions.
In order to reduce the building facilities’ costs, the
reduction of owned real property is essential. For the task
to be implemented, several strategies can be applied:
? Acquisition of new, smal er ac ommodation or rent
of the ac ommodation owned to outsiders;
? Discarding separate technical departments and out-
sourcing (e.g. IT, financial ac ounting and other
technical services);

? Sharing the infrastructure with other companies;
Fig. 10. Multifactor linear regres ion model of relative
? Reduction of energy expenses;
values of administration costs

? Audit and discarding of equipment and vehicles not
used on a regular basis, due to reducing the auxil-
This regression model is proposed for forecasting a
iary premises and other measures.
company’s administrative costs value depending on the
In order to increase the ef iciency and competitive-
number of administration employe s.
nes of a company in construction market, various con-

struction company overhead costs optimization strategies
4.4. Construction company overhead costs
can be applied separately or in complex. The nature of the
optimization strategies
considered strategies implies that their selection can be
Construction company’s overhead costs optimization solved, for example, by the implementation of multiple
strategies are implemented to reduce the unreasonably criteria evaluation methods (Ginevi?ius et al. 2008a,
high management system expenses and thus to increase 2008b; Peldschus 2008; Šarka et al. 2008; Zavadskas et al.
the competitiveness of a company. General y, as shown 2008a).
in Fig. 11, the overhead costs optimization methods are

as follow: the company’s real estate reorganization, 5. Conclusions
shake-up of its administrative structure or even the altera- The article presents a relevant and innovative methodol-
tion of the company’s management system. Al optimiza- ogy for evaluating the competitiveness of construction
tion methods are defined for each company individual y, company overhead costs. The competitive situation of
in ac ordance with their operational conditions and other construction sector in the central region of Lithuania was
important factors.
analyzed with the reference to questionnaire data of the
The management system of a company, its structure mid-sized construction companies, executing general
as wel as administrative costs can be reduced through construction works. The competitive advantages and
company reorganization or restructurization strategies, disadvantages of a construction company’s costs are
even though their selection and implementation is a hard evaluated ac ording to the overhead costs relative value
task. In order to solve this task the advices of manage- distribution function, obtained by statistical data process-
ment professionals would be helpful. Usual y, a new ing. The identified normal distribution law for overhead
management system is created, transparent and compre- costs relative value probability enables the evaluation of
hensible to al employe s of the company. Firstly, the the competitiveness of a specific construction company
audit of administration operations is car ied out and new overhead cost. Similar methodology was used to identify
structural possibilities of operation are assessed, such as: the probability distribution laws for relative values of
both the company’s administrative and building facilities’
? Disestablishment of some particular job positions,
replacing them with outsourcing;
costs and evaluate their competitiveness.

Direct costs
Optimization strategies
Overhead
costs
C
o
n
s
t
r
u
c
t
i
o
n

p
r
i
c
e

Management system of the company
Facility structure of the company
Profit / Risk
Business structure of the company


Fig. 11. Strategies for optimization of construction company overhead costs


Journal of Civil Engineering and Management, 2009, 15(2): 215–224
223
Upon accomplishing the multifactor correlation- Ginevi?ius, A. 2007. Rinkodaros b?kl s ?mon je kiekybinis
regression analysis of survey data, the linear regression
?vertinimas [Quantitative evaluation of enterprise market-
equation of dependence between the relative values of
ing effectiveness], Technological and Economic Devel-
overhead costs and the relative values of the company
opment of Economy 13(1): 19–23.
infrastructure elements was obtained. According to the Ginevi?ius, R.; Podvezko, V. 2008a. Multicriteria graphical-
adequacy research of the regression model, it was deter-
analytical evaluation of the financial state of construction
mined, that the multifactor linear regression model ade-
enterprises, Technological and Economic Development of
quately describes the correlation between the relative
Economy 14(4): 452–461.
values of the company’s overhead costs, number of ad- Ginevi?ius, R.; Podvezko, V.; Raslanas, S. 2008b. Evaluating
ministration employees and building facilities’ area. This
the alternative solutions of wall insulation by multicriteria
can be applied in practice to forecast overhead expenses
methods, Journal of Civil Engineering and Management
in accordance with different parameters of a construction
14(4): 217–226.
company’s management system.
Holland, N. L.; Hobson, D. Jr. 1999. Indirect cost categorization

By applying the correlation-regression analysis the
and allocation by construction contractors, Journal of Ar-
regression equations were obtained, which describe the
chitectural Engineering 5(2): 49–56.
dependences between the relative values of construction Jaafar, M.; Abdul Aziz, A. R.; Wai, A. L. S. 2008. Marketing
company building facilities’ costs and buildings’ area, as
practices of professional engineering consulting firms:
implement or not to implement? Journal of Civil Engi-
well as those relating to the number of administration
neering and Management 14(3): 199–206.
employees and administration expenses. These models Juodis, A. 2001. Statyba Europoje: rinka, valdymas, pl tra
are proposed to be implemented practically in order to
[Construction in Europe: market, management, develop-
forecast the expenses of construction company admini-
ment]. Kaunas: Technologija.
stration and facilities management.
Kim, Y.; Ballard, G. 2001. Activity-based costing and its appli-
The selection of strategies aimed to increase the
cation to lean construction, in Proc of the 9th Annual
company’s competitiveness is determined by the over-
Conference of the International Group for Lean Construc-
head costs dependence on business infrastructure and
tion, August, 2001, Singapore.
management system elements of the company. Therefore, Kim, Y.; Ballard, G. 2002. Profit point analysis – new project
the obtained regression expressions can be applied to
overhead control, in Proc of the 10th Annual Conference
select the appropriate construction company overhead
of the International Group for Lean Construction, August,
costs structure and to form the overhead costs optimiza-
2002, Gramado, Brazil.
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STATYBOS ?MON S PRID TINI? IŠLAID? KONKURENCINGUMO ?VERTINIMAS
A. Šiškina, A. Juodis, R. Apanavi?ien
S a n t r a u k a
Didinti statybos ?mon s konkurencingum? yra vienas svarbiausi? statybos verslo strategini? uždavini?. ?mon s valdymo
strukt?ra, veiklos organizavimas, turimo turto naudojimas yra vieni iš svarbiausi? veiksni?, nuo kuri? tiesiogiai priklauso
statybos ?mon s prid tin s išlaidos, kartu ir si?lomos statybos darb? kainos. Statistiškai tiriant homogenin? statybos ?mo-
ni? grup? nustatyta statybos ?moni? prid tini? išlaid? reikšmi? pasiskirstymo funkcija, pagal kuri? gali b?ti ?vertinti konk-
re?ios statybos ?mon s konkurenciniai pranašumai ar tr?kumai. Išsamiai apibr žta prid tini? išlaid? strukt?ra ir statybos
rangov? apklausos rezultatai dar ?tak? pagrindini? ?mon s veiksni?, nuo kuri? priklauso prid tini? išlaid? dydis,
parinkimui – tai ?mon s administracijos darbuotoj? skai?ius ir nekilnojamojo turto plotas. Sudarytas statybos ?mon s
valdymo sistemos ir infrastrukt?ros charakteristik? regresinis modelis yra patogus planavimo ir prognozavimo ?rankis
parenkant tinkam? ?mon s veiklos prid tini? išlaid? strukt?r? ir pritaikant ?mon s pl trai reikaling? strategij?. Si?loma
statybos ?moni? konkurencingumo ?vertinimo metodika leidžia statybos organizacij? vadovams adekva?iai ir moksliškai
pagr?stai nustatyti ?mon s pad t? homogenin s statybos ?moni? grup s rinkoje, ?vertinti jos veiklos efektyvum? ir ne-
sunkiai nustatyti kainos, išlaid? konkurencinius pranašumus bei tr?kumus dalyvaujant statybos darb? ir paslaug? viešu-
osiuose pirkimuose.
Reikšminiai žodžiai: prid tin s išlaidos, konkurencingumas, valdymo sistema, optimizavimo strategijos.

Ala ŠIŠKINA. PhD student. Dept of Civil Engineering Technologies, Kaunas University of Technology. BS in Civil En-
gineering and MSc in Civil Engineering from Kaunas University of Technology, Lithuania. Research interests: costing in
construction, bidding and estimating, construction marketing and bidding strategies, optimization.
Arvydas JUODIS. Long-term Professor of Civil Engineering and Social Sciences (Building Economics) in the Dept of
Civil Engineering Technologies and Dept of Strategic Management, Kaunas University of Technology. Former Head of
the Dept of Civil Engineering Technologies. Author and co-author of numerous scientific books and publications. Re-
search interests: modelling and optimization of construction processes, estimating, construction marketing, management
and optimization strategies.
Rasa APANAVI?IEN . Assoc Professor of Civil Engineering and Management in the Dept of Civil Engineering Tech-
nologies, Kaunas University of Technology. PhD in Civil Engineering from Kaunas University of Technology (2002). Re-
search interests: construction project management, investment projects, strategic management and effectiveness model-
ling, neural networks.


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