What Is a Soft Cost in Construction?

March 4, 2024

Contractors often underestimate soft costs, which can be much more difficult to pin down than hard ones. The key to avoiding soft cost loss is clear scheduling, which ensures that project managers are aware of when workers and subcontractors will be on the job site, what tasks they’ll be performing, and how long each task should take. It’s also important to factor in any changes to the original estimate for each phase of the project, as these can eat into soft costs like consulting fees and change order costs.

What Is a Soft Cost in Construction?

Soft costs are indirect expenses that influence development outside of the actual construction process. They can begin well before construction starts and continue after the building is completed, influencing everything from marketing to maintenance. Despite their intangibility, these costs can add up quickly. The most common soft costs include architectural and engineering fees, planning costs, surveying fees, legal fees, insurance premiums, and marketing costs. In addition, some soft costs are tied to the overall operation of a construction company and may include administrative costs such as software, executive salaries, accounting services, office equipment, financing fees, and taxes.

Contractors can be tempted to brush off soft costs when putting together a bid, but this will catch up to you in the form of operational costs that exceed your profit objective. Understanding what is a soft cost in construction allows you to create accurate budgets and set profitable prices.

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