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Pricing strategy in the US construction industry


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  • Krishna Mochtar
  • David Arditi
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    This paper presents several issues related to pricing in construction. First, problems with current pricing strategy in construction are explored. Second, pricing strategies based on a market-based approach are proposed. Third, survey findings of the top 400 US contractors are presented regarding their current pricing practices and the applicability of the proposed pricing strategies. In conclusion, the belief that current pricing strategy in construction is predominantly cost-based is confirmed by the survey findings; indeed, in setting the markup, most contractors rely on their intuition after subjectively assessing the competition. The three internal pricing variables that have the largest statistically significant contingency coefficients with pricing strategy are 'marketing intelligence capabilities', 'annual contract value', and 'the type of client in most projects'. 'Owner's characteristics', 'competitors'characteristics', and 'market demand' are statistically significant external variables in making pricing strategy decisions. A change of bidding procedure is proposed so that all parties in construction can maximize the benefits of market-based pricing strategies.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Construction Management and Economics.

    Volume (Year): 19 (2001)
    Issue (Month): 4 ()
    Pages: 405-415

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    Handle: RePEc:taf:conmgt:v:19:y:2001:i:4:p:405-415

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    Keywords: Cost-BASED Pricing Market-BASED Pricing Pricing Variables Bidding Procedure;


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    Cited by:
    1. C. Y. Yiu & C. S. Tam, 2006. "Rational under-pricing in bidding strategy: a real options model," Construction Management and Economics, Taylor & Francis Journals, vol. 24(5), pages 475-484.


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