Modeling for determination the markup ratio in construction projects in Egypt

Abstract

ABSTRACT The low cost mentality dominates in the competitive business of the construction industry. The pressure on contractors’ profit margins has further increased after a prolonged recession in this sector, which has seen construction demand and output shrinking significantly. This thesis examines the factors that contractors perceive to be important when they are considering the ratio of their bid mark-up. A structured questionnaire was established to meet this objective. The aim of this study is to identify and rank the factors perceived to influence bid mark-up size decisions, furthermore develop a model to identify the mark up percentage for different projects. Thirty two factors were identified which were shortlisted based on previous relevant investigations and the input of local industry experts. The survey was done for one hundred engineers from different companies. This study identifies the key determining factors in calculating the mark-up ratio and their importance weights. The analysis of data was done using SPSS software. The results reveal the following as the primary factors affecting general contractors' bid mark-up size decisions which are the cash flow and inflation in material prices. A model to determine the mark-up ratio for different project cases was established. This model will help the construction companies in determining the mark-up ratio in a scientific way. The model was validated on four different projects to demonstrate the accuracy of the model in determining the percentage of mark-up of the various construction projects.