Construction cost vs project cost
Construction costs form part of the overall costs incurred during the development of a built asset such as a building. Very broadly, construction costs will be those costs incurred by the actual construction works themselves, and on some projects may be determined by the value of the contract with the main contractor. Construction costs may also include costs that might not in themselves be considered literal construction costs (hard costs), such as fees, profits, overheads, and so on.
Many projects will also include costs that it is not possible to determine when the construction contract is awarded (such as prime cost sums and provisional sums), and there may be construction works that are awarded by the client outside of the main contract (such as fitting out the interior, minor alterations to the completed works, installation of equipment, and so on).
In addition, the contract is likely to allow for the contract sum to be adjusted as a result, for example, of variations to the works, claims for loss and expense, or fluctuations (a way of dealing with inflation on large projects that may last for several years).
For more information see: Construction cost.
There will also be much wider project costs that are incurred by the client, in addition to the cost of any construction costs.
These wider project costs might include:
- Land or property acquisition.
- Commissions.
- Statutory fees.
- Consultant fees directly associated with the development.
- Some fixtures and fittings.
- Project insurance, inflation, taxation and financing.
- Internal costs directly associated with the development.
Once the project is operational, there will be other ongoing costs:
- Wages.
- Utilities.
- Maintenance and repairs.
- Utilities.
- Insurance.
- Security.
- Rent.
- Sales.
- General and administrative expenses.
For more information see: Operational cost.
It is very important when planning projects and allocating budgets and responsibilities to be very clear where different costs are allocated and who is responsible for monitoring and controlling them.
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