IJRET: International Journal of Research in Engineering and Technology eISSN: 2319-1163 | pISSN: 2321-7308 _______________________________________________________________________________________ Volume: 04 Issue: 10 | Oct -2015, Available @ http://www.ijret.org 149 A SYSTEMATIC STUDY ON SITE OVERHEAD COSTS IN CONSTRUCTION INDUSTRY R.Janani 1 , P.T.Rangarajan 2 , S.Yazhini 3 1 Assistant Professor Department of Civil Engineering, Vels University, Chennai, Tamilnadu, India 2 Assistant Professor Department of Civil Engineering, Vels University, Chennai, Tamilnadu, India 3 P.G.Scholar Department of Civil Engineering, Vels University, Chennai, Tamilnadu, India Abstract Construction sector is the one of the largest employer in the country. It has become a highly competitive field with a minimum profit. Construction costs are two types; one is direct cost (labors, materials, P & M, Equipments etc...) Other one is indirect costs/Overhead costs (Staff salaries, Staff benefits, Conveyance, Labor miscellaneous, Internet, Watch and ward etc.) and is added as a percentage to sum of labor, material and equipment. Normally 10 to 15% of contract value will be taken as overhead costs. Overhead costs cannot be neglected, but the indirect costs should be in control always. If the cost goes out of control, the contractors will not be in business. The article discusses about overheads, overhead percentage on contractual value, factor affecting the overhead costs, major issues faced by contractors, how overhead costs affects the income, Engineers/Contractors view on overheads, investigation and control of overhead costs, creating cost awareness among employees, lists out the major items which affects the overheads, interviews with professionals and data collection from the projects and hence creates awareness while bidding and plan the financial resources effectively. Key Words: Overhead costs, bidding, Engineers, Contractors --------------------------------------------------------------------***---------------------------------------------------------------------- 1. INTRODUCION Before start of a project, construction costs are to be approximately planned. The accurate costs will be known only after the completion of a project. At the initial stage, contractors who are bidding should have the complete knowledge about the Direct and Indirect/Overhead costs. This helps them to control of overheads throughout the project. Overhead costs are very important costs while estimating a building. Overhead costs increases continuously and does not go down. The overhead costs cannot be neglected in any project; these costs constitute a very substantial cost of the project. The objective of this article is to investigate the overhead costs in construction companies and to find out the major factors affecting the project overheads. A number of aspects were found in the construction industry and few suggestions are given to control and minimize the overhead costs and to eliminate the unnecessary costs and that is used to manage the overheads in efficient manner. 2. OVER HEADS Overhead costs are said as indirect costs. Overhead costs are not a component of actual construction work but they support the main work. However there are two types of construction overhead costs, Company overhead costs and Project overhead costs. Company overheads are administration costs and the project overheads are site overhead costs. Site overhead costs will be 10 to 12% and inclusive of company overhead costs will be 15% on contract value. If the Overhead cost exceeds 15%, the profit tin project will go down. Overhead costs are included in every estimate for any type of construction or reconstruction projects which are generally added as a percentage to sum of labor, material and equipment. List of Site Overhead items are shown in table1, Table 1: Site Overheads. Staff Salaries Annual Benefits Conveyance Telephone Charges Printing & Stationary Poja Expense Postage and Courier Xerox Staff Welfare Insurance Photos & Videos Medical Expense Site Accommodation Bank Charges Watch & Ward Freight Charges Testing Charges Safety Sundries & Others Tools & Tackles Water Charges Temp Structures Labor Miscellaneous P & M for Overheads 2.1 Percentage on Contract Value Some of the Overhead items have high percentage on Contract value approximately shown in Figure 1.