What Are Hard Costs and Soft Costs in Construction?

No matter what type of construction project you are working on, you need to understand one main thing: costs. Running a large construction job is costly. It’s not uncommon to spend hundreds of thousands of dollars in materials and labor to build a home.

Because of this, estimating skills are important. Accurate cost estimation is challenging, but by understanding the differences between hard costs and soft costs, you can make your project more successful. Distinguishing between the two can help allocate resources accurately, anticipate expenses effectively, and ensure a smooth construction process.

Hard Costs

Also known as direct costs, hard costs refer to the tangible, physical aspects of a construction project. They make up the bulk of the budget and are relatively easier to estimate compared to soft costs. Examples of hard costs include the following:

• Labor and materials. Labor costs include wages for construction workers, subcontractors, and specialized trades (such as electricians, plumbers, and masons). Materials include any physical components needed for construction, such as concrete, steel, wood, bricks, roofing, drywall, and insulation.
• Equipment and machinery. This includes heavy machinery like cranes, bulldozers, and excavators, as well as tools and smaller equipment like drills, saws, and scaffolding. Rental or purchase costs for machinery needed to complete construction would also fall under this category.
• Site work and landscaping. This includes clearing land, excavation, grading, and foundation work, as well as getting utilities, roads, sidewalks, and parking lots in place. Landscaping such as installing grass, trees, irrigation systems, and other aesthetic or functional outdoor elements would also be included.
• Structural and mechanical systems. Structural elements such as framing, foundation, roofing, and exterior walls are included, as well as HVAC systems, electrical wiring, plumbing pipes, fire protection, and security systems.

Soft Costs

Also known as indirect costs, soft costs cover the services and expenses necessary for planning, permitting, and managing the construction project. These costs often continue even after physical construction is complete. Examples include the following:

• Architectural and engineering fees. Costs for designing the building, drafting blueprints, and ensuring compliance with safety and zoning codes would fall under this category, as well as engineering services, including structural, mechanical, electrical, and civil engineering.
• Permits, legal fees, and compliance costs. This category includes building permits, environmental impact assessments, and zoning approvals, as well as inspections, safety code compliance, and legal fees for contract drafting, negotiations, and dispute resolution.
• Insurance and financing costs. These costs include builder’s risk insurance, liability insurance, and worker’s compensation coverage. Loan interest and construction bonds are also included.
• Marketing and administrative expenses. Marketing, advertising, office expenses, administrative staff salaries, and software for project management all fall under this category.

Contact Us Today

Knowing all your costs is important. Without a good estimate of your costs, you run the risk of undercharging and not getting paid enough money, which is always an issue.

Having a solid contract in place can be helpful. A Florida construction contracts lawyer from Linkhorst Law Firm can help protect your interests. Schedule a consultation with our office today by calling 561-626-8880 or filling out the online form.

Source:

advancedbuildingcorporation.com/blog/hard-and-soft-costs-construction/