Mochtar, K and Arditi, D (2001) Pricing strategy in the US construction industry. Construction Management and Economics, 19(4), pp. 405-415. ISSN 01446193
Abstract
This paper presents several issues related to pricing in construction. First, problems with current pricing strategy in construction are explored. Second, pricing strategies based on a market-based approach are proposed. Third, survey findings of the top 400 US contractors are presented regarding their current pricing practices and the applicability of the proposed pricing strategies. In conclusion, the belief that current pricing strategy in construction is predominantly cost-based is confirmed by the survey findings; indeed, in setting the markup, most contractors rely on their intuition after subjectively assessing the competition. The three internal pricing variables that have the largest statistically significant contingency coefficients with pricing strategy are 'marketing intelligence capabilities', 'annual contract value', and 'the type of client in most projects'. 'Owner's characteristics', 'competitors' characteristics', and 'market demand' are statistically significant external variables in making pricing strategy decisions. A change of bidding procedure is proposed so that all parties in construction can maximize the benefits of market-based pricing strategies.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bidding procedure; cost-based pricing; market-based pricing; pricing variables |
| Index terms: | survey, strategy, bidding, intuition, competition, owner, pricing, construction industry, marketing |
| Subjects: | cognitive psychology, sociology, market analysis, industry analysis, management, economic analysis, bidding, business, data collection methods |
| Topics: | Procurement, Stakeholder Management, Research Practice, Business Strategy |
| Descriptive scope: | 4 PCTE |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here