Transfer Pricing Benchmarking for Pan‑European Construction Services Contractor
How we helped a construction services provider develop a defensible benchmark covering eight European jurisdictions while meeting an aggressive timeline.
Background
Our client, a routine construction‑services provider active in the energy sector, recently reorganised its European operations. To support new intra‑group service agreements, the company needed a defensible benchmark covering eight key jurisdictions—including a mix of Eastern, Central and Western European Countries—while meeting an aggressive, one‑week turnaround.
Challenge
The client faced several significant challenges that required a tailored approach:
- Fragmented Data by Jurisdiction: Many countries offered only a handful of truly comparable contractors, jeopardising statistical reliability.
- Pure‑Play Focus: The client required comparables with no inventory or tangible assets in their statements—effectively "pure contractors."
- Market Volatility: Divergent cost structures between Western and Central‑Eastern Europe risked distorting a single regional range.
- Operational Deadline: Preliminary results were needed within three working days; the full report within ten.
Our Solution
We implemented a four-step approach to address the client's specific requirements:
Hyper‑Targeted Search Strategy
Deployed ArmsLength AI to screen European databases for companies classified under construction services tied to power‑plant, pipeline and HVAC installations.
Applied negative filters to exclude entities with stock‑to‑sales ratios consistently above 10%, ensuring alignment with the client's asset‑light profile.
Rapid Iteration & Client Alignment
Delivered an initial European set (A + B tiers) in 72 hours—as promised—to let the client pre‑screen.
Build separate ranges for Western vs. Central‑Eastern Europe, jurisdictional ranges and stock-to-sales profile ranges.
Jurisdictional & Functional Segmentation
Where a country yielded ≥ 6 comparables, we produced a local inter‑quartile range; otherwise we presented the full European range, clearly labelled per the client's instructions.
Split the analysis by stock‑to‑sales profile (Low < 10% vs High > 10%) to demonstrate the effect of working‑capital intensity on margins.
Audit‑Ready Documentation
Prepared a comprehensive report on day 10 detailing search parameters, accept/reject matrix, statistical outputs and narrative justifications, meeting both OECD and local TP file standards.
Results
Robust Set of 38 Comparables
14 Western‑European, 24 Central‑Eastern, all meeting the "pure contractor" test.
Clear Profitability Guidance
European Net Cost Plus (NCP) IQR; jurisdictional ranges disclosed where statistically reliable.
Demonstrated Sensitivity
Side analysis showed contractors with High stock‑to‑sales ratios earned ~120 bps higher NCP margins—a nuance later cited by the client in internal pricing policy papers.
On‑Time Delivery
Preliminary file in three days; final report in ten.