What are "soft costs" in construction budgeting?

In construction budgeting, "soft costs" refer to the indirect expenses that are not directly tied to the physical construction of the project. This can include a variety of expenses such as architectural and engineering fees, permits, legal fees, financing costs, insurance, and other costs necessary to facilitate the development of the project but that do not involve the actual construction work itself.

Understanding soft costs is crucial for budgeting accurately, as they can comprise a significant portion of the total project expenditure. By identifying and managing these costs effectively, contractors and project managers can avoid budget overruns and ensure a more comprehensive understanding of the financial requirements of a construction project.

The other options focus on different categories of costs: direct construction labor and costs for materials are associated with the physical construction, while equipment leasing pertains to hard costs necessary for construction operations. However, none of these categories capture the broader and more administrative nature of soft costs.