Let’s take a look at indirect project expenses. What are they and when should they be added to your estimate? The indirect project expenses, or indirects, are items needed to complete a project, but do not pertain to a specific item of work. For example, temporary power and water are needed to complete some projects and are outside of the direct scope of work for the project. Another example is toilet facilities. They are necessary for the project to be completed, but are not directly tied to a specific scope of work.
Most companies will have an indirect job cost spreadsheet that they fill out before bid day, so they can determine the appropriate amount to include for a specific project. When filling out the spreadsheet, they will be looking at the anticipated duration of the project, when the work will be performed, phasing, and special requirements in the specifications and project documents.
I do know of some contractors that just include a percentage of the direct cost for the indirect cost. That method can work in a pinch, but you really do want to be more precise, if you have the time.
As a rule of thumb, the prime contractors will carry most of the indirect costs But that does not mean that subcontractors should assume that the prime has included costs for indirect items that may be needed for their specific scope of work. All contractors need to look at what indirect expenses are required in their scope of work, and make sure they are covered either by the prime contractor, or in their bid.
Filed under: Construction Tagged: Competitive bidding practices, Construction costs, construction industry, Construction profits, direct costs, Estimate, estimating help, estimating process, estimator, indirect costs, Justin Short
