A construction project has indirect and direct costs. These costs comprise the total expenses of building a house. So, before you embark on your construction project, understand the costs you will incur to budget appropriately.
Indirect Construction Project Costs
Indirect costs are not accountable for a specific facility, function, or product directly. They can also be fixed or varied. Personal costs, administration costs, and security costs are the major types of indirect costs of a construction project. Essentially, indirect costs are not connected to the construction project directly.
In some cases, the indirect costs of a construction project are classified as project overhead costs and general overhead costs. In most cases, project overhead costs include the money spent on safety facilities, offices, stores, parking facilities, and staff. General overhead costs include the money paid to design engineers, head-office expenses, and cost of managers, directors, and schedulers.
Direct Construction Project Costs
These are costs or expenses accountable for a function, product, or facility directly. These include the costs of construction materials, equipment, and labor. Contractors develop these costs by performing a detailed analysis of a construction project. They check the construction methods to be used, site conditions, and the resources that will be necessary for the successful completion of the project.
In addition to this classification of the costs of a construction project, it’s important to know that these expenses can be fixed costs, time-related costs, or quantity-proportional costs. Fixed cost is the money spent on the purchase of machinery or equipment at a fixed amount of money. Time-related cost refers to the money spent on a specific activity for a given period. Quantity-proportional cost, on the other hand, is the amount spent depending on the required quantities of construction materials.
When budgeting for a construction project, it’s important to have these costs in mind. That way, you will factor in every cost to ensure the smooth and successful completion of your project.