Abstract
One of the trends in construction today is the increasing use of specialty contractors. As a result, projects are becoming more complicated and fragmented, more coordination is required, and overhead costs of the general contractors are increasing relative to the direct costs. Better ways of controlling job-site overhead costs are needed. This paper presents profit-point analysis (PPA), a method for analyzing how indirect staff time of a general contractor is actually spent on a project. Profit points are imaginary points where a general contractor and subcontractors are interfaced. The PPA is a method of analysis on these points, which adapts activity-based costing from manufacturing to construction. This new method, illustrated through a case study, yields valuable information for managerial control; for example, the different amount of supplemental support from the general contractor required by different subcontractors.Key words: overhead costs, cost analysis, profit points, activity-based costing (ABC), management efficiency, evaluating specialty contractors.
Published Version
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