What type of costs are considered direct costs in construction?

Direct costs in construction are expenses that can be specifically attributed to a particular project. These costs are essential to the project's execution and typically include expenses such as materials, labor, and equipment that are directly used in the construction process.

When a contractor is determining the overall cost of a project, understanding which costs are direct is crucial for budgeting and estimating. For example, the cost of concrete, steel, and other materials that are required for building, as well as the wages of workers directly involved in the construction of that specific project, fall under this category.

Options like administrative expenses and project managers' salaries, while necessary for the overall operation of a construction business, are categorized as indirect costs because they are not directly tied to any single project. Similarly, insurance premiums, although important for managing risk, are also considered indirect costs, as they cover the overall business operations and not a specific project. Consequently, identifying materials and labor that are directly attributable to a specific construction project is what qualifies them as direct costs.