A Regression Model to Enhance the Profitability of Local Construction Contractors in Uganda

Abstract

Doubtlessly, the primary goal of every construction company is to maximise profitability. Without this, construction companies cannot survive. Incidentally, Ugandan local construction contractors (LCCs) continue to collapse in a short period, despite enormous public and private investments in the construction sector. This study investigates the profitability of LCCs in Uganda. An investigation was conducted to develop a regression model that would enable LCCs to enhance their profitability and minimise business failure. A questionnaire survey was conducted to collect primary data from 47 local construction companies registered with the Uganda National Association of Building and Civil Engineering Contractors (UNABCEC) and secondary data were collected from audited books of accounts covering from year 2016 to 2018. Thirty-five valid responses were received, representing a response rate of 74%. Data were coded into SPSS version 25, analysed and displayed using the relative importance index (RII), statistical correlation and regression analysis. The findings indicated that the profitability of LCCs was unsatisfactory when compared to the profitability ratios recommended for the construction industry and those of contractors in other countries. The results also indicate that the profitability of LCCs is significantly affected by the timeliness of payments, cost of finance, competitive bidding environment, project delays, price fluctuations and corruption tendencies, in that order. The findings of this study will benefit construction industry players by providing awareness about the factors affecting the profitability of LCCs. A regression model to enhance profitability was developed using regression analysis. This will help LCCs enhance their profitability by developing mitigation strategies that prevent low profitability; consequently, business failure will be minimised.