PRICING CONSTRUCTION CONTRACTS UNDER TAX REFORM ACT OF 1986

This paper presents two alternative techniques for explicit consideration of corporate income taxes in pricing construction contracts. It demonstrates that income taxes may result in 42-76% increase in the FaRM (fair and reasonable markup pricing model which presents a present-value approach to pricing construction contracts) for a small example project. The paper also reviews major Tax Reform Act of 1986 changes affecting the construction industry. The before-tax and the after-tax cash-flow analyses are the two widely used methods of incorporating income taxes in economic studies. Both methods are appropriate for the FaRM pricing model and should yield the same results.

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  • Accession Number: 00497553
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Sep 30 1990 12:00AM