Effects competition on construction cost

Contactors unit costs are constantly changing but the change is not proportion to the change in price of materials used to build up such unit costs. This research investigated how contractors unit costs fluctuate and established if competition is the reason for such fluctuation. The study also investigated on how unit costs are established looking into different cost items involved. The effect of competition on the contractors unit cost and hence the total tender figure has been established. Data was gathered from thirty questionnaires involving class one to class seven construction companies. Consultants, clients and contactors were also interviewed. Unit costs and basic price of material were extracted from sixty bills of quantities of completed projects of which major items were concrete from sixty bills of quantities of completed projects of which major items were concrete, block-work, reinforcement, form-work, plastering and painting. Contractors unit costs were found to be increasing at a lower rate compared to material price increase though labour, material, plant, overheads and profit items are considered in establishing the unit cost. The study established that competition is very high leading to reducing profit hence no room for growth. However it was also observed that there is unfair practice where by enough time for tender is not allowed and contactors of high and lower class are subjected to compete in one project. It is recommended clients and consultants should provide enough time for tender and put into competition contractor in the same group. Contactors should establish their unit cost carefully and properly manage the project.