Application of mathematical model techniques to the planning and control of overhead costs in the construction industry

For the purposes of cost planning and control and efficient execution of construction projects, overhead costs - head office overhead costs of construction companies and site overhead costs of construction projects - are important to companies in the industry as these costs sometimes amount to ten to twenty per cent of project costs. The aim of this research has been to study methods of overhead costs planning and control that are in use in the construction industry, the limitations of these methods as effective tools, and to propose new methods which could be practical to apply. The method of overhead costs planning and control developed in this work is called the 'safe zone method'. This method defines lower and upper bound limits of safe zones within which costs should lie at planning stages and lower and upper bound limits of sub safe zones for actual costs at cost examination stages. The safe zone method has been developed for planning and control of the head office overhead costs of construction companies, site overhead costs of construction projects and the cost components of these costs. Three mathematical models, based on the statistical technique of multiple regression analysis, have been developed in this work for determining the overhead costs of a construction project. The first model is for the head office overhead costs apportioned to a project at the tender stage. The second model is for the site overhead costs at the tender stage and the third model is the proportion of the head office overhead costs incurred for a period of time that is apportioned to a project during the construction stage of the project. A definition of overhead costs in the construction industry has been given in this work. This has been based on the behavioural and functional characteristics of these costs. A way of grouping the overhead cost items into cost centres or cost components for planning and control purposes have also been proposed in this work.