CHALLENGES OF APPLYING THE OVERHEAD COST FACTORS IN BIDDINGS OF CONSTRUCTION PROJECTS

The construction industry is a major player in the economy of a country, generating both employment and wealth, and the main portion of a country's budget is allocated to infrastructure development projects. According to statistics, in Iran, about 373 trillion Irs had been invested in construction projects in the year 2012. Meanwhile, statistics show that a great number of the construction projects failed to be nished. Indeed, many construction projects experience extensive delays and, thereby, exceed initial time and cost estimates. In this regard, government data also indicate that the earning losses due to unnished projects are over 120 thousand million dollars (about two-thirds of the annual construction budget). There are many reasons why delays occur. They may be due to strikes, rework, poor organization, material shortage, equipment failure and so on. Many contractors justify delays by lack of in time funding and tight budgets. Unfortunately, in most cases, they spend an untold amount of resources on the project; as large as several times the contracted cost. A chief reason for this is that contractors who submit bids are not fully aware of the scale and proportion of the project. In Many projects, overhead expenses are of considerable importance and are at least 30 percent of the total amount of project cost. As a result, any minor mistakes in calculating project overhead expenses can make the project fail. This paper is mainly a case study in the area of road construction projects, which concerns estimation of overhead factor deciencies relative to the system expenses status. The results show that the overhead Cost factors is inversely related to the cost of the project, and with the increasing cost of the project, the factor is decreased. Finally, a linear relation is established to determine the overhead factor relative to contract cost.