What does “total project cost” include in construction?

The term "total project cost" refers to the comprehensive sum of all expenses incurred throughout the duration of a construction project. This includes both direct and indirect costs.

Direct costs are those that can be directly attributed to the construction activities themselves, such as labor and materials. However, indirect costs encompass a broader range of expenses that, while not directly tied to the construction activities, are essential for the project’s completion. These can include overhead costs, administrative expenses, insurance, permits, and any other costs that support the project but do not fall under direct labor or material costs.

Understanding total project cost is critical for accurate budgeting and financial planning in construction. By considering all potential costs, including indirect expenses, contractors can ensure that they have a realistic financial framework for their projects, minimizing the risk of overruns and ensuring profitability.