Abstract: Aiming at increasing the efficiency of the different subsidiary companies in a general contractor, the transfer pricing method with costs and profit sharing is proposed. A model that describes the profit of the different subsidiary companies in the general contractor is proposed. Based on the model, analysis is carried out. Results show that, to increase the efficiency, the headquarters of the general contractor should distribute less profit into the subsidiary companies. The appropriate proportion of profit distributed to the company for design called Company #1 or the construction company called Company #2 should be determined by the cost and efficiency coefficients. Also, the profit distributed to Company #1 and Company #2 should be proportional to the effort made in the design and construction, and the efficiency, and is inversely proportional to the square of its cost coefficient.

Key words: efficiency, general contractor, profit distribution