Establishing an organizational structure, defining the project operation model, and implementing a supporting allocation mechanism are three essential elements for companies to develop and enhance their management systems. Recently, I took part in the general contracting project management consulting services for an engineering technology company. After deciding the operation modes for both company-level and branch-level projects, our Gaodeng project management consulting team performed multiple scheme plans and comparisons. Ultimately, we finalized internal business settlement and accounting rules tailored to the company’s current situation and growth needs. Below is a brief overview.
The company has traditionally focused on survey and design services, measuring revenue and workload based on output value. With the shift and upgrade toward general contracting business, it became necessary to enhance overall general contracting capabilities. This led to successive adjustments in both organizational structure and project operation models. The newly developed allocation mechanism for general contracting must not only align with these organizational and operational changes but also integrate effectively with the traditional survey and design business allocation system. This integration plays a guiding role in optimizing and refining the design business’s allocation mechanism.
To ensure a smooth transition from output value management to independent project accounting and distribution, the company did not abandon the output value distribution model entirely. Instead, it maintained the output value distribution (considering traditional design business) while calculating project gross profit based on project profit assessments. Using the project performance evaluation results, gross profit bonuses are calculated and allocated to both production and functional departments involved in the general contracting projects. This approach encourages active participation and collaboration in executing the projects.
When measuring the value of marketing projects, the general contracting project is viewed as comprising survey, design, and project management service components. Each of these entities allocates a specific percentage of the net contract amount as marketing operating expenses, which are accounted for within the department undertaking the project. Alternatively, this process can be simplified by directly including marketing operation bonuses within the overall project gross profit bonus.
For prefabricated housing projects, the production department’s contribution is measured by allocating survey fees, design fees, and general contracting (construction) project management fees as output value to the respective responsible departments. Corresponding departmental wages and cost expenses are amortized proportionally. Additionally, gross profit bonuses from certain accounting projects are distributed to the relevant production departments.
The value of functional departments participating in project execution is assessed by allocating project management bonuses (for departments related to project management) and technical quality bonuses (for technical quality departments) within the project gross profit bonus. These bonuses reward functional departments closely involved in general contracting activities.
The contribution of the general contracting project itself is measured by dividing the general contracting (construction) management fee into a fixed portion, which covers labor costs and expenses of the general contracting project department. Any surplus is then distributed as a project department bonus to incentivize performance.
While this allocation model requires further upgrades and optimization to enable fully independent accounting of the general contracting business and to strengthen internal collaboration, it currently serves as a transitional framework. It effectively safeguards the interests of each department, encourages production departments—especially those centered on design—to engage in general contracting projects, helps develop project management talent, and supports the company’s overall transformation and growth.
The integration of this allocation mechanism with the company’s comprehensive budget management system, salary structure (basic salary + functional salary + project salary), and performance evaluation (functional + project) creates a closed-loop management system. Moving forward, this will facilitate enhanced simulated market operations between internal business units through contractual arrangements, simplifying settlement rules and improving operational efficiency.
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