El-Sharkawy, A R (1993) Pricing construction contracts under inflation. PhD thesis, North Carolina State University, USA.
Abstract
Inflation is an economic reality often affecting every industry throughout the world. The construction industry is no exception; it is highly sensitive to inflation due to its unique characteristics. Anticipated and unanticipated inflation during the construction period makes estimating, pricing, and budgeting for a construction project more of an art than since. The Fair and Reasonable Markup (FaRM) Pricing Model is used to develop a systematic and quantitative pricing model which takes inflation into account. This study relaxes the assumption of the inflation-free world that existed in the FaRM Pricing Model. The framework developed for incorporating inflation into the model accounts for the behavior of various cost components under price movements in the overall economy. The upgraded model estimates an inflation-adjusted, Required Rate-of-Return (RRR) to determine the contractor's FaRM. The model demonstrates how contractors can consider the risk variations inherent in various construction contract types. The synergistic impact of inflation and taxation on RRR and FaRM is also investigated. Impact of the Omnibus Budget Reconciliation Act (OBRA) of 1993 on the construction industry is reviewed. Implementing the model should help construction managers achieve a better understanding of inflation. This in turn should enable contractors to make more intelligent contract pricing decisions instead of using a subjective markup. Contractors would bid lower on projects that are more attractive and become more competitive, while maintaining their RRR. This should result in lower costs to owners and reduce the number of business failures in the construction industry.
| Item Type: | Thesis (Doctoral) |
|---|---|
| Thesis advisor: | Farid, F |
| Uncontrolled Keywords: | budgeting; estimating; inflation; pricing; taxation; variations |
| Index terms: | construction contract, estimate, construction industry, taxation, pricing, owner, construction project, inflation, variation, construction manager, estimating, business failure, movement, budgeting |
| Subjects: | sociology, industry analysis, financial management, policy economics, contractual condition, financial and cost management, profession, production management, economic analysis, contract type, health behaviours and lifestyles |
| Topics: | Contract Administration, Business Strategy, Cost Management, Research Practice, Roles and Professions, Stakeholder Management, Project Management, Regulations & Compliance, Procurement |
| Descriptive scope: | 4 PCTA |
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