Abstract
Problems of forming cost estimates for the construction industry is relevant in Russia, where many construction organizations face the issue of a current pricing system that does not consider new technologies in construction. This leads to underestimations of costs in construction and limits opportunity for competitive pricing between construction companies. This article aims to provide recommendations for improving reliability in calculating construction costs and enhance efficiencies in capital investments by construction participants. The article provides an analysis of the existing system of pricing in construction, and the peculiarities of the system of pricing in both Russia and the United States. Results indicate the need for expediency in applying certain provisions of the foreign system into that of Russia’s for determining the cost of construction. These measures would help minimize the presence of contractors in the construction market who do not actually perform the construction and installation work on their own, and to achieve the desired level of profitability of 8 to 10%.
Highlights
The construction industry is one of the leading spheres of economic activity
It is necessary to stress that United States of America (USA) and Russian cost-estimate databases have several differences, including structure and content of expenses related to a unit rate
In the USA, the rate obtained from the cost-estimate database covers all basic materials as well as overhead expenses and estimated profit
Summary
The construction industry is one of the leading spheres of economic activity. This field creates and reproduces the major share of key assets of the country’s national economy. In 2014, 8.5 per cent of the economically active population were employed in the construction industry, and construction companies constituted 9.9 per cent of the total number of companies in the country. Since construction is an industry that consumes resources and requires bank credits for realizing construction projects, the probability of an investor’s additional costs in the form of interest on banking, for an unencumbered balance of appropriations, depends on the correctness of the cost-estimate documentation. The raised amount of investment funds may transpire to be insufficient for completing the project. It is important for contractors at all levels (general contractors and subcontractors) to ensure that the cost estimate of construction and installation works covers all costs of work performed as well as the company’s regular profit level. The importance of an objective assessment for the cost of building is underlined in Hackett (2011). Goryachkin, Shtokolov, & Hayrapetyan (2014) believed that successful functioning in the construction industry of a country depends on the completeness and accuracy of their cost-estimate documentation
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