Analysis of Dominant External Factors on Construction Project Overhead Costs

Abstract

AbstractOverhead costs in construction projects are costs that are borne and charged to the contractor to support the work. However, the amount of overhead costs for each project is different and is influenced by external factors such as environmental, socio-cultural, political, and the nature of the project location. Therefore, this study aims to identify the dominant external factors that affect construction project overhead costs and determine the percentage of overhead costs set aside by contractors from the direct costs of construction projects to anticipate the risks posed by overhead costs. In this study, a total of 30 questionnaires were collected from the contractors and a Likert scale of 1–5 was used to measure the level of influence of external factors on construction project overhead costs. Then, the collected data is processed using factor analysis techniques and produces three dominant external factors on construction project overhead costs, including (1) Economics, (2) Law, (3) Social-cultural and the impact of the COVID-19 pandemic. Regarding the percentage of overhead costs on construction projects, the results show that overhead costs on construction projects range from 6 to 10% of direct costs.KeywordsOverhead costExternal factorConstruction project