| S.No. | Field / Checkpoint | Reference | Status |
|---|---|---|---|
| A. SITE OVERHEADS | |||
| A1 | Site office + accommodation cost Acceptance: Estimated | Per month × duration | OK NC NA |
| A2 | Site management salaries (PM, engineer, supervisor) Acceptance: Estimated | Per CTC | OK NC NA |
| A3 | Site utilities (electricity, water, transport) Acceptance: Estimated | Per consumption | OK NC NA |
| A4 | Insurance + bond costs Acceptance: Estimated | Per policy | OK NC NA |
| A5 | Total site overheads / month × duration / contract value × 100 = site OH % Acceptance: Computed | Typically 5-10% | OK NC NA |
| B. CORPORATE OVERHEADS | |||
| B1 | Head office allocation + tendering cost + financing Acceptance: Per HO recovery | Company overhead rate | OK NC NA |
| B2 | Typically 3-8% of contract value Acceptance: Per management | Per company | OK NC NA |
| C. PROFIT | |||
| C1 | Profit margin % Acceptance: Per quotation strategy | Strategic — typically 8-15% | OK NC NA |
| C2 | Risk premium % (for difficult / risky projects) Acceptance: Per project | Additional | OK NC NA |
The Overhead + Profit (OH&P) computation is the most consequential commercial decision in any tender. It determines: - Whether your bid wins or loses (vs competitors) - Whether the project is profitable (after execution) - Whether the company survives (cumulative gross margin)
Direct costs (material + labour + plant) are largely defined by market + design + BOQ. OH&P is where commercial judgment lives. Get it right: win + profit. Get it wrong: lose + low-margin work or no work at all.
Industry data on Indian construction OH&P: - Total OH&P loading: 15-30% on direct cost - Site overheads: 5-10% - Corporate / Head Office: 3-8% - Profit margin: 8-15% (highly variable) - Risk premium: 0-10% additional for risky / unfamiliar work
A 2% under-loading can mean ₹2-5 crore loss on a ₹100 crore project. A 3% over-loading can mean losing the bid by ₹3 crore. Either way, OH&P is high-stakes.
Governed by CPWD Works Manual 2019 (for govt tenders) + company-specific policies + FIDIC contract pricing principles + market intelligence on competitor pricing.
Section A — Site Overheads (project-specific, not directly attributable to BOQ items):
Site management: - Project Manager + Site Engineer + Supervisors + Quantity Surveyor - Safety Officer + Quality Officer + HSE staff - Stores keeper + Accountant + Office assistant - CTC (Cost to Company) per person × duration
Site office + accommodation: - Container offices / portacabins / rent - Worker housing / labour camp - Furniture + IT equipment - Internet + telecom - Monthly cost × project duration
Site utilities (during construction): - Power: temporary connection + DG fuel - Water: tanker + bore + municipal - Sanitation: portable toilets + maintenance - Sewerage: temporary septic / disposal - Per month × duration
Site transportation: - Vehicles (jeep + car + bus for staff) - Driver salaries + fuel - Material transport (if not in direct cost)
Insurance + bonds: - CAR (Contractor's All Risk) insurance: 0.5-1.5% of contract value - Workmen's Compensation - Third Party Liability - Performance Bank Guarantee fees - EMD interest cost - Retention money interest cost
Statutory compliance: - BOCW Cess (1% — sometimes in direct cost, sometimes overhead) - Labour licenses + compliance costs - ULB permissions + fees - Pollution + safety NOCs
Miscellaneous: - Mobilisation cost (one-time): site setup, fencing, signage - Demobilisation cost (one-time): clear site, dispose temporary works - Site beautification + handover preparation - Project closeout activities
Calculation: Site OH = Sum of monthly costs × project months + One-time costs As % of contract value: typically 5-10% for medium-large projects (lower % for very large, higher for small)
Section B — Corporate / Head Office Overheads (proportionate share):
HO costs allocated to project: - Senior management salaries (proportionate) - Tendering / Estimation department - Finance + Accounts + Tax - HR + Admin - Legal + Compliance - IT systems - Office rent + utilities - Marketing + business development - Audit + statutory fees
Financing cost: - Working capital interest (LC, OD, term loan) - Project-specific WC requirement × interest rate × duration - Mobilisation advance interest (savings if available) - Retention money carrying cost
Calculation: Annual HO costs × Project share / 100 As % of contract value: typically 3-8%
Section C — Profit margin: - Strategic + competitive judgment - Typically 8-15% of direct cost + overheads - Higher (15-25%) for specialised / monopoly work - Lower (4-8%) for highly competitive / govt tenders - Government tenders often have prescribed margin caps (CPWD 10%)
Section D — Risk premium (project-specific): - New geography: +1-3% - Unfamiliar technology: +2-5% - Long duration (> 36 months): +1-2% (escalation risk) - Difficult client: +1-2% - Foreign exchange exposure: +1-3% - Political risk: +1-5% - Adverse weather / season: +1-2%
Total OH&P loading = Site OH + Corp OH + Profit + Risk
Application to BOQ: - Uniform loading: same % applied to all items (simplest, common) - Strategic loading: higher % on profitable items, lower on volatile items (advanced) - Front-end loading: higher % on early-cycle items (cash-flow advantage; risky if change orders reduce scope) - Back-end loading: opposite (rare; for stable scope)
1. Total OH&P too low — competitor bids lower; you win but lose money; gross-loss project.
2. Total OH&P too high — accurate pricing but lose to under-bidder; no work; cost of empty company.
3. Site overhead under-estimated — site office cheaper than estimated; PM doesn't account fully; later loss.
4. HO allocation wrong — small project gets same allocation as large; small project unprofitable but appears OK.
5. Insurance + bond cost missed — included only premium; financing cost of EMD / PBG over duration not accounted.
6. Mobilisation cost not separated — large one-time cost spread incorrectly; cash-flow issues.
7. Demobilisation cost forgotten — at project end, site clearance costs not budgeted; gross-margin erosion.
8. Working capital interest under-charged — at 10-12% interest, 60-day payment cycle adds 2-3% to cost; often missed.
9. Retention money cost not in OH — 5-10% retained, released after 12-24 months; carrying cost 1-3% of contract value.
10. No risk premium for new geography — first project in new state; learning curve + setup cost not provisioned.
11. Wrong escalation assumption — fixed-price contract over 24 months; inflation higher than expected; profit eroded.
12. Tax provisions wrong — GST on subcontract: 18% but on materials may differ; impact not modelled.
13. Liquidated damages not modelled — late delivery LD provisions; risk weight not in price.
14. Profit margin diluted across BOQ — profitable items + loss items netted; later, scope changes increase loss items; total margin negative.
15. No sensitivity analysis — what if material price moves +/-20%? OH&P should have margin to absorb.
Companion formats: - Rate Analysis Brickwork (FMT-EST-003) — direct cost per item - Rate Analysis Plaster (FMT-EST-004 + 005) — plaster rate - Rate Analysis Shuttering (FMT-EST-006) - Labour Productivity Sheet (FMT-EST-007) - Plant Productivity Sheet (FMT-EST-008) - Escalation Price Adjustment (FMT-EST-010) - Hire vs Own Analysis (PMC-EQP-RPT-001) — informs OH - BOQ Format PWD (FMT-TND-006) - Comparative Statement (FMT-TND-011) — competitive benchmarking
Standards + references: - CPWD Works Manual 2019 — Section on Estimation + Rate Analysis - CPWD Specifications 2019 — Foundation for direct cost components - General Financial Rules (GFR) 2017 — Government tender pricing - PMI PMBOK 7th Ed — Cost Management Knowledge Area - AACE International Estimating Practice — international reference - FIDIC Sub-clause 14 + 8.3 — Price + payment provisions - ICAI / AICAS / IIM Manuals — Construction cost accounting - Indian Institute of Architects (IIA) Tariff — for design + supervision fees - CMA India Productivity Norms — for plant + labour benchmarks - Income Tax Act 1961 Sec 44AD / 44AB — Presumptive taxation for small contractors