Overhead Costs in Building Construction in Saudi Arabia Mohammad Al-Shahri Ahmed Al-Ojairi

Outline Introduction Research Objective Research Methodology Results and Analysis Conclusion Recommendations

Introduction What is an OH Cost?

Research Objective Evaluate the OH costs practices of construction companies in Saudi Arabia Contractor Awareness Percentage of company OH costs to annual construction volume Methods of allocating company OH costs

Research Methodology Questionnaire General Information About The Contractor OH In General Company OH Costs

Research Methodology S F S F S F S F S F S F 250 Contractors 61 Contractors

Results and Analysis What is an OH Cost? 64 % No definition But examples ! 23% Reasonable Answer 13 % Accurate Answer

Results and Analysis Percentage of OH costs 48% OH costs = 15% or less 52% OH costs more than 15% (AVG= 16.83)

Results and Analysis Contractors' Perception Regarding OH Costs Current rate of OH costs is not acceptable Uncontrolled OH costs can badly affect the performance OH costs was not important in the past OH costs can be monitored and controlled

Results and Analysis Changes in company OH costs Company OH costs have increased during the past years

Results and Analysis Reasons for increased company OH costs 78.4 Delayed payments 76.4 Lack of new projects (recession) 68.8 Cost inflation 67.2 Government regulation 65.6 Firm's growth 64.2 Client related reasons 63.0 Increased marketing cost

Results and Analysis Distribution of company OH cost 71.4 Auto. & Eq. Expenses 68.8 Head office expenses 65.6 Labor health, travel, recruitment 64.2 Financing cost 50.4 Head office staff 50.4 Travel expenses 28.2 Insurance & taxes 24.6Marketing

Results and Analysis Company OH allocation base 38% Direct cost including project OH 23% Project duration 21% Material, labor & equipment. Cost 16% Material & labor cost

Conclusion Average OH cost in Saudi Arabia is higher than ratio in the literature

Recommendations Increase the Awareness of Contractors Short Courses Seminars Professional And Scientific Societies

Recommendations Contractors should plan to maintain optimal levels of company OH costs Eliminate Unneeded Spending Secure and Increase The Firm's Market Share

Recommendations Contractors are recommended to establish cost control plans to help reduce company OH Costs

Recommendations Reduce the Company OH costs Safety Programs Apply a proper cost accounting system Customer satisfaction Apply the right combination of resources