A protocol for data collection and analysis of profitability for construction companies

Construction organizations carry out projects in areas such as residential and commercial building, industrial plants, healthcare and education. Companies bid on projects and expect to obtain a profit that is the difference between the revenues they obtain from the owners of the projects and the cost that is incurred on them to execute the project according to the schedule, quality and safety required. The intent of the study is to develop a protocol for data collection and profitability analysis in order to assess the overall profitability of construction firms. This research states that a construction company is a profit generating entity that is composed of profit centers and cost centers that interact with each other and with entities outside the company. A profit center is an entity that creates billable work that is reimbursed by the clients of the construction company. A cost center is another entity within that organization that provides services to fulfill the activities of a profit center in order to achieve the profitability requirements of the company. The protocol developed in this research will present a framework to obtain the correct data that allows the analysis of the changes in profit margins of different projects undertaken by a construction company. Analysts using the protocol examine relationships between entities outside the company with the cost centers and the profit centers. Furthermore, the relationships between cost centers are analyzed to understand how they affect the profitability of the profit centers. The interactions between profit centers and cost centers also play an important role in understanding how profit margins of projects vary. Finally, the way profit centers influence each other has been inspected. A specific scale to measure the performance of the different entities of the company has been created, and the protocol has been applied to three different projects executed at the same time by a construction company based in Kuwait. Using the protocol generates results that are essential in order to evaluate the overall profitability of a construction company to identify problems within the organization that could be corrected in order to improve its overall profitability.