A markup determination for building contractors in Ghana

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As builders’ estimated costs are similar the main variable in bids is the markup. But deciding on the right markup to add to an estimate is not an easy task for a contractor. The markup must be small enough to ensure a good chance of winning the contract, yet big enough to realize a reasonable profit. Studies have identified some thirty-six factors that affect markup decision in Ghana. Optimum markup determination entails the evaluation of these factors, and in Ghana building contractors are found to consider and evaluate the factors subjectively when they set markup for projects. This research sought to identify the most important factors needed for the markup determination in the competitive bidding environment and provided a suitable model for computing the optimum markup. The research comprised a questionnaire survey, supplemented with interviews, among all class Dl and a random sample of class D2 building construction firms in Ghana with the aim of identifying problems associated with the markup decision and the importance that the contractors attached to the factors that affect the markup decision. The research revealed that project cash flow, risk involved in investment and competition are the most important factors that affect markup decision and the FaRM Pricing Model is a suitable tool for the determination of the optimum markup by Ghanaian contractors.
A thesis submitted to the Board of Postgraduate Studies, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfilment of the requirement for the award of the Degree of Master of Science in Construction Management
Markup, Competitive bidding, Construction, Ghana