Overhead%20Costs%20in%20Building%20Construction%20in%20Saudi%20Arabia

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

• Introduction
• Research Objective
• Research Methodology
• Results and Analysis
• Conclusion
• Recommendations

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Introduction
What is an OH Cost?
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Research Objective
Evaluate the OH costs practices of construction
companies in Saudi Arabia
Contractor Awareness
Methods of allocating company OH costs
Percentage of company OH costs to annual
construction volume
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Research Methodology
Questionnaire
Company OH Costs
General Information About The Contractor
OH In General
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Research Methodology
250 Contractors
61 Contractors
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Results and Analysis
What is an OH Cost?

• 64 No definition But examples !
• 23 Reasonable Answer
• 13 Accurate Answer

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Results and Analysis
Percentage of OH costs

• 48 OH costs 15 or less
• 52 OH costs more than 15 (AVG 16.83)

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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

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

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Conclusion
Average OH cost in Saudi Arabia is higher than
ratio in the literature
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Recommendations
Increase the Awareness of Contractors
Short Courses
Professional And Scientific Societies
Seminars
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Recommendations
Contractors should plan to maintain optimal
levels of company OH costs
Eliminate Unneeded Spending
Secure and Increase The Firm's Market Share
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Recommendations
Contractors are recommended to establish cost
control plans to help reduce company OH Costs
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Recommendations
Reduce the Company OH costs
Safety Programs
Apply the right combination of resources
Apply a proper cost accounting system
Customer satisfaction
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