Feasibility Study for a General Contracting Company in Egypt

How a general contracting company makes money, and where it loses it

A small or medium contracting company builds structures or carries out civil works for an owner, a company or a public body, either as main contractor or as a subcontractor to a larger one. It does not sell a finished product; it sells quantities of work: cubic metres of concrete, tonnes of fixed rebar, square metres of masonry. It gets paid through progress certificates: roughly every month the work done is measured, the consultant or owner reviews it, and the certificate is paid weeks or months later, after deducting a retention held until handover or until the end of the maintenance period.

Meanwhile, steel and cement are paid for when you buy them, labour every week and equipment hire every month. That is why many contractors get into trouble not because the contract loses money but because cash runs out before the certificate is paid. A general contracting feasibility study starts from three numbers: the deepest negative balance during the project, the amount still held after handover, and what moving material prices do to a fixed-price contract.

Contractors' Federation registration and the rules for public works

Contractors in Egypt have a federation: the Egyptian Federation for Construction and Building Contractors, established under Law 104 of 1992. According to a note published by SK Sadany & Partners in June 2026, a contractor may not enter tenders or carry out contracting work before registration is complete; registration requires a syndicate engineer specialised in the activity and an accountant, both covered by social insurance; and contractors are classified by paid-up capital, experience, technical staff, work done in the last five years and equipment, with the maximum value of tenders they may submit among the classification criteria¹. So build your study on the class your actual numbers qualify you for. Company formation itself can be handled by Maher Consulting Firm.

If your client is a public body covered by Law 182 of 2018 (its scope and general bond rules are explained on the general supplies company feasibility study page), these provisions apply to works contracts specifically²:

Payment: the body pays on-account instalments according to progress, within sixty days from submission of the certificate supported by its documents and acceptance of those documents. If it pays late, it owes the equivalent of the financing cost for the delay at the credit and discount rate announced by the central bank, provided official documents for the amount claimed are submitted.
Performance bond: 5% of the contract value, returned as soon as the warranty period set in the contract ends.
Quantity changes: if new circumstances arise after the contract is signed and the tender documents provide for it, the body may increase or reduce the quantity of each item by up to 25% in construction contracts, on the same terms and prices.
Price changes: in works contracts with an execution period of six months or more, the body adjusts the contract value at the end of every three contractual months for increases or decreases in the cost of its items, based on the producer price indices published by the Central Agency for Public Mobilization and Statistics (CAPMAS), and any agreement to the contrary is void.
Late completion charges: if you are late for a reason attributable to you, the total may not exceed 10% of the contract value where the delay does not exceed 10% of the total period, rising to 15% beyond that. It is calculated on the value of the late works only if the late part does not prevent use of what has been completed; otherwise on the final account value.

Exceptional economic decisions have the Supreme Compensation Committee at the Ministry of Housing (Law 84 of 2017 as amended by Law 173 of 2022), which compensates works, supply and public service contracts to which the state, its companies or public legal persons are party for damage from economic decisions issued in periods set by the Cabinet³, so do not build your study on it. All these rules govern the public body's relationship with the party it contracts with directly: they do not apply automatically to your contract with a private owner or company, nor to a subcontractor on a government project, whose payments are governed by its contract with the main contractor. So write into the contract when certificates are paid, the retention rate and when it is released, and whether the price moves with materials.

VAT on contracting after 2025

Contracting used to carry a 5% schedule tax with no input-tax deduction; Law 157 of 2025 moved it to the 14% general VAT rate with input-tax recovery, effective 18 July 2025⁴. Since Minister of Finance Decree 417 of 2025 amended the executive regulations, contracting and construction works count as services of a continuous nature, invoiced electronically on the basis of the consultant-approved progress certificate⁵, and for such services the law makes issuing the invoice the taxable event⁶. In other words, VAT falls due when you invoice the approved certificate, not when you collect it, so you may pay it before you collect it. A subcontractor invoices on the certificate approved by the main contractor⁵.

For contracts already concluded that had a consultant-approved certificate, an e-invoice or an e-receipt issued before the law took effect and that continue afterwards, Decree 418 of 2025 sets the VAT base at 36% of the total invoice value (5.04% of the invoice at the 14% rate) without applying the deduction rules, and a subcontractor is deemed to have paid the VAT on its works if a certificate approved by the main contractor shows that the main contractor paid it on the same works. Any renewal of an existing contract or increase in the works beyond the percentage set in the contract counts as a new contract⁵. The decree also allows collecting VAT at the prescribed rate on the total invoice value with deduction⁵. The law requires government bodies and public authorities to remit 20% of the VAT due on them directly to the Tax Authority on account of the tax⁶. Check with your accountant which treatment applies to your contract.

Illustrative example: an EGP 12 million contract over 8 months

An illustrative example with assumed figures to explain the method, not market prices: a company builds the concrete frame and masonry of a residential building for a private owner:

Contract value: EGP 12,000,000 before VAT, executed over 8 months at 6%, 10%, 14%, 16%, 16%, 15%, 13% and 10% a month.
Direct cost: EGP 10,200,000, or 85% of the contract: materials EGP 6,120,000, of which steel and cement EGP 3,366,000; labour and subcontract gangs EGP 3,060,000; equipment EGP 1,020,000, all paid in the month the work is done. The margin is 12,000,000 − 10,200,000 = 1,800,000, i.e. 15% before overheads and financing.
Certificates: submitted at the end of each month for the work done and paid two months later, so month 1's work is paid in month 3, after a 5% retention.
Retention: EGP 600,000 in total, released after a 12-month maintenance period from handover, i.e. in month 20.

Month	Work done (EGP)	Costs paid (EGP)	Net cash (EGP)	Cumulative balance (EGP)
1	720,000	612,000	-612,000	-612,000
2	1,200,000	1,020,000	-1,020,000	-1,632,000
3 (first payment)	1,680,000	1,428,000	-744,000	-2,376,000
4	1,920,000	1,632,000	-492,000	-2,868,000
5 (deepest point)	1,920,000	1,632,000	-36,000	-2,904,000
6	1,800,000	1,530,000	294,000	-2,610,000
7	1,560,000	1,326,000	498,000	-2,112,000
8 (handover)	1,200,000	1,020,000	690,000	-1,422,000
9	0	0	1,482,000	60,000
10	0	0	1,140,000	1,200,000
20 (retention released)	0	0	600,000	1,800,000

(The project alone, before overheads, financing and VAT.)

The gap: the contractor needs EGP 2,904,000 in month 5, i.e. 24.2% of the contract value and about 1.6 times the expected profit.
At handover: in month 8 the owner still owes EGP 3,222,000, about 26.9% of the contract, in two unpaid certificates plus the retention.
VAT: assuming each certificate is invoiced at 14% the month after the work with the net VAT paid a month later, the 14% paid on materials alone is deducted the following month, and the owner pays the VAT with the certificate, the gap rises by EGP 137,088 to EGP 3,041,088.

What if certificates are late or materials go up?

We now add the cost of financing the negative balance, assuming 2% a month on the balance at the end of each month; your bank sets the actual rate:

Scenario	Deepest cash need (EGP)	Month balance turns positive	Profit before financing (EGP)	Financing cost (EGP)	Profit after financing (EGP)
Base: paid two months later	2,904,000	9	1,800,000	330,720	1,469,280
Every certificate 60 days later	6,030,000	11	1,800,000	738,720	1,061,280
Steel and cement 10% higher from month 4	3,011,712	10	1,564,380	349,379	1,215,001
Month 4 certificate cut 10% on review, recovered in the final account	2,904,000	10	1,800,000	344,112	1,455,888
The same cut, never recovered	2,904,000	10	1,608,000	344,112	1,263,888
60-day delay and higher materials together	6,188,202	12	1,564,380	766,804	797,576
10% advance payment recovered from each certificate	2,064,000	9	1,800,000	207,360	1,592,640

A two-month payment delay does not change the paper profit, but it doubles the gap to EGP 6,030,000, and financing eats 41% of the profit instead of 18.4%. With VAT the gap in this scenario rises to EGP 6,662,520, because the invoice is issued on the approved certificate and you pay its VAT two months before you collect it. If the approval itself is delayed, the invoice and its VAT are delayed with it.

A 10% rise in steel and cement is not far-fetched: according to CAPMAS, the average price of a 50 kg bag of ordinary Portland cement rose from EGP 198.6 to EGP 215.9 between June 2025 and June 2026 (about 8.7%), and a tonne of reinforcing steel from EGP 39,350 to EGP 41,340 (about 5.1%)⁷. In a fixed-price contract the whole increase comes out of your margin: EGP 235,620, or 13.1% of the profit. A cut on review costs EGP 192,000 if it is never recovered, and delays the positive balance by a month either way.

On an 8-month public contract, a delay attributable to you of more than 24 days (10% of the period) is enough to raise the ceiling on late completion charges from 10% to 15%, i.e. from EGP 1,200,000 to EGP 1,800,000, the whole profit, if they are calculated on the final account (EGP 12,000,000 in the example).

Overheads and how many projects you can run at once

The company in the example has a syndicate engineer covered by social insurance, costing EGP 20,000 a month (an assumption), plus a storekeeper and an administrator on the private-sector minimum wage of EGP 7,000, in force from 1 March 2025⁸, with the employer's 18.75% social-insurance share⁹, EGP 16,625 for both; office and yard rent of EGP 10,000, an accountant at EGP 4,000 and other expenses of EGP 6,000. That is EGP 56,625 a month, or EGP 679,500 a year.

One project a year leaves EGP 789,780 after financing and overheads in the base case, EGP 381,780 with a 60-day delay, and only EGP 118,076 with the delay plus higher materials.
Capital of EGP 3,000,000 covers the base project table alone (EGP 2,904,000), but adding VAT and overheads takes the deepest need to EGP 3,324,213 in month 5, and to EGP 7,002,270 if certificates are 60 days late. Two identical projects on the same timetable need EGP 5,808,000 before VAT and overheads.

In other words, the number of projects you can run at once is set by each project's deepest negative balance, not by how many engineers you have. The method is in our article on break-even and working capital.

How to reduce the capital locked in each project

An advance payment against a bank guarantee: 10% cuts the gap in the example from EGP 2,904,000 to EGP 2,064,000, before the guarantee commission.
A complete certificate, on time: in public contracts the sixty days start from submission of the certificate with its documents, and if the body refuses to receive it, send it by express mail so the period starts from its date of receipt².
Negotiate the retention: its release date, or replacing it with a bank guarantee at provisional handover.

Common mistakes in a general contracting feasibility study

Calculating profit from the contract value without a monthly cash table showing when each certificate is paid.
Assuming certificates are paid as soon as they are submitted, with no scenario for a delay of two months or more.
Forgetting the retention and how it builds up with every project.
Pricing steel and cement at bid-day prices in a fixed-price contract that runs for months.
Ignoring VAT that falls due on the invoice, not on collection.
Leaving review cuts and late completion charges out of the margin.
Taking a second project with capital that covers only one.

To build the cash table, see cash flow for small businesses; to finance the gap with a loan, a feasibility study for a bank loan. Buying the land, building and selling the units yourself is a different study: a property development feasibility study.

Frequently asked questions about a general contracting feasibility study

How much capital do I need for a general contracting company?

The largest project you will take and when its certificates are paid set it. In the illustrative example, an EGP 12,000,000 contract needed EGP 3,324,213 at its deepest point after VAT and overheads, and EGP 7,002,270 if every certificate was paid 60 days later.

When does a government body pay a progress certificate?

If the body is covered by Law 182 of 2018, it pays within sixty days of submission of the certificate supported by its documents and their acceptance; if it pays late, it owes the financing cost for the delay, provided official documents are submitted². This does not apply to subcontracts or private contracts.

What is the VAT rate on contracting works?

The 14% general rate with input-tax recovery since 18 July 2025, instead of the 5% schedule tax⁴. Ongoing contracts with an approved certificate, an e-invoice or an e-receipt issued before then have a tax base of 36% of the invoice value with no deduction, under the conditions set out above⁵.

Is a contractor compensated when steel and cement prices rise?

In public works contracts of six months or more, the contract value is adjusted every three contractual months using producer price indices². In a private contract there is no adjustment without a written clause; in the example a 10% rise in steel and cement took EGP 235,620 off the profit.

Sources

Mondaq (SK Sadany & Partners Law Firm). Registration With The Egyptian Contractors Union 2025: Conditions And Steps For Registering Construction Companies (2026-06-25) — secondary source. Checked 22 October 2026.
National Investment Bank (Official Gazette copy). الجريدة الرسمية، العدد 39 مكرر (د): القانون رقم 182 لسنة 2018 بإصدار قانون تنظيم التعاقدات التي تبرمها الجهات العامة (in Arabic) (2018-10-03). Checked 22 October 2026.
alberonsy.com. القانون 173 لسنة 2022 بتعديل قانون تعويضات عقود المقاولات والتوريدات والخدمات العامة 84 لسنة 2017 (الجريدة الرسمية، العدد 51 مكرر (هـ)) (in Arabic) (2022-12-26) — secondary source. Checked 22 October 2026.
EY. Egypt introduces significant VAT updates on certain goods and services (2025-07-22) — secondary source; Deloitte Middle East. Construction contracting activities treatment following the VAT law amendments (2025-10-28) — secondary source. Checked 22 October 2026.
Al-Waqae Al-Masriya copy). الوقائع المصرية، العدد 237 تابع (ج): قرارا وزير المالية رقما 417 و418 لسنة 2025 بشأن الضريبة على القيمة المضافة لعقود المقاولات وأعمال التشييد والبناء (in Arabic) (2025-10-23). Checked 22 October 2026.
Financial Regulatory Authority. قانون الضريبة على القيمة المضافة رقم 67 لسنة 2016 وفقًا لآخر تعديل (in Arabic). Checked 22 October 2026.
Al Mal News. «الإحصاء»: أسعار الأسمنت ترتفع حتى 12.1% والأسمدة تصل إلى 56.6% خلال عام (in Arabic) (2026-08-16) — secondary source. Checked 22 October 2026.
Ministry of Planning and Economic Development. الاجتماع الأول للمجلس القومي للأجور: رفع الحد الأدنى لأجور القطاع الخاص إلى 7000 جنيه (in Arabic) (2025-02-09). Checked 22 October 2026.
Andersen Egypt. Social insurance in Egypt (contribution rates under Law 148/2019) (2026-06-30) — secondary source. Checked 22 October 2026.