Analysis of the Markup Factor in Housing Projects in Distrito Central, Honduras, Using an Indirect-Cost-Based Method

Abstract

Accurate estimation of the markup factor (FSC) is critical because it links the project direct cost to the expected total selling price and, therefore, to profitability. This study evaluates FSC practices in housing construction projects executed in Distrito Central, Honduras, by comparing company-provided markup factors against factors computed through a method that explicitly estimates indirect costs associated with both central office administration and project administration. Data was obtained from project budgets and structured interviews with the professionals involved. Three real projects were analyzed and anonymized as A, B, and C. Results show that applying a fixed FSC without formally quantifying indirect costs can significantly distort expected profit. For Project A, the recommended FSC increases from 1.16 to 1.21, with profit dropping from 10.00% to 4.95% if the original FSC is kept; for Project B, the recommended FSC rises from 1.20 to 1.23, reducing profit from 12.00% to 9.57% under the original FSC. In contrast, Project C indicates potential overestimation: a recommended FSC of 1.28 (instead of 1.30) maintains the target profit while lowering the selling price. The findings support computing indirect costs from the outset rather than relying on a single heuristic factor.