Profit-point analysis: A tool for general contractors to measure and compare costs of management time expended on different subcontractors

One of the trends in construction today is the increasing use of specialty contractors. As a result, projects are becoming more complicated and fragmented, more coordination is required, and overhead costs of the general contractors are increasing relative to the direct costs. Better ways of controlling job-site overhead costs are needed. This paper presents profit-point analysis (PPA), a method for analyzing how indirect staff time of a general contractor is actually spent on a project. Profit points are imaginary points where a general contractor and subcontractors are interfaced. The PPA is a method of analysis on these points, which adapts activity-based costing from manufacturing to construction. This new method, illustrated through a case study, yields valuable information for managerial control; for example, the different amount of supplemental support from the general contractor required by different subcontractors.Key words: overhead costs, cost analysis, profit points, activity-based costing (AB...