Cost vs price
The terms 'cost' and 'price' are are frequently confused with one another and used incorrectly. However, their meanings are clear, and very different:
- The term 'cost' refers to the expense incurred in the production of a product or service.
- The term 'price' refers to the payment required for the supply of a product or service.
Typically, in many businesses, the difference between what something costs to produce, and the price it is sold for equates to the profit earned by the producer / seller.
However, in the construction industry, the term cost typically refers to the expense incurred in relation to building works. It can also be used to refer to:
- Wider project costs incurred by the client, such as fees, finance charges, land purchase costs and so on.
- Long term costs such as lifecycle costs, whole life cost and so on.
Costs commonly incurred on a construction project can be categorised as hard costs (those related to physical construction) and soft costs (those that are not instantly visible or tangible).
In the construction industry, the term 'price' typically refers to the price offered by a supplier. This could relate to a price for carrying out part of the construction works, for the supply of goods, for the supply of services and so on.
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