Hard Costs vs Soft Costs in Construction: Definitions & Examples

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It’s not easy for construction companies to make accurate budget forecasts. There are many variables to consider, from market to labor costs and always fluctuating prices. But creating a detailed budget is key to successful construction project management.

One way to control your project billing is by defining the hard costs vs soft costs on a construction project. To create a realistic budget, you need to know the difference between these two costs.

What Are Hard Costs in Construction?

Hard costs are costs that are directly related to your construction project. Some refer to these as brick-and-mortar costs, because these costs include the structure, construction site and landscape.

When it comes to budgeting, hard costs are easier to estimate. They’re tangible and revolve around labor and materials. While labor and materials are not set in stone, those prices are less likely to drastically change. If they do, there are usually red flags that indicate their volatility, and you can address that in the budget.

Being able to track your resources is how you keep to your budget, and project management software helps monitor costs. ProjectManager is project and work management software that delivers real-time data on your construction project. Live dashboards, Gantt charts and instant status report tracking costs as they occur to control overspending. Get started with ProjectManager today for free.

ProjectManager's dashboard
Monitor construction costs in real time with ProjectManager’s live dashboards. Learn More!

Hard Costs in Construction Examples

Hard costs are building materials associated with the actual building of your construction project. These can include:

  • Any Material for the Construction Project: This includes wood, steel, glue, siding, roofing, nails, screws and so on. They can also be labor costs for your team and the contractors you hired on the construction site.
  • The Building Site: This includes utilities, cement, life safety systems, equipment, paving, grading and heating, ventilation and air conditioning (HVAC) systems.
  • Landscaping Costs: This includes the price of planting trees and grass, adding mulch to the site, flowers, bushes, etc. Site improvements are also included, such as walkways, gazebos, permanent or fixed benches and other outdoor furnishings.
  • The Interior: These hard costs include wallpaper, paint, trim, flooring, etc. Life safety systems fall under this umbrella, too, such as fire alarm and sprinkler systems, fire escapes and other related systems.
  • LEED Certification for Commercial Real Estate Projects: As sustainable buildings become more in demand, you may need to acquire a LEED certification. There are governmental incentives, such as loans, grants, tax, credits and fee waivers for adhering to green building practices.

Related: 8 Free Construction Excel Templates

What Are Soft Costs in Construction?

Soft costs, on the other hand, are costs that are indirectly related to materials, labor or the physical building of the project. As you can imagine, these intangible costs will prove far more difficult for you to estimate as you build a budget for your project.

Soft costs can persist long after the project has been completed. Some of them will be ongoing and regular costs related to maintenance and maintenance insurance. They can occur anytime in the life cycle of a project. It doesn’t mean these soft costs are impossible to estimate and track—but they are definitely moving targets. A construction estimate template can help.

When forecasting a budget, it’s important that you are thorough and think through everything from pre- to post-construction. It can be easy to miss soft costs but expect them to be 25 to 75 percent of the total construction budget.

Soft Costs in Construction Examples

There are many soft costs in construction. To help forecast their impact on a construction project, the accounting will often break them down into categories:

  • Architectural, Design and Studies Fees: These include feasibility studies, testing consultants, professional services and hiring health and safety experts. Also included are architectural fees, master planning, interior design and engineering fees.
  • Land, Permits, Survey Fees: This includes land and real estate development costs associated with the legal process. This also includes appraisal fees, land acquisition, assessments, land survey fees and the costs of inspections and permit fees paid to local governments.
  • Rentals, Equipment and Tools: Some of these items aren’t related to the final project delivery. This includes office trailers and equipment, cellphones, radio communication systems and any equipment in the staging area.
  • Loans, Accounting, Finance and Insurance Fees: This category includes loan-generated interest, bank transaction fees and accounting expenses, including software and data input. There are also construction loan commitment fees, broker fees and permanent commitment fees, as well as all insurance, dues for bid bonds, professional liability insurance and performance bond fees.
  • Project Management Costs and Taxes: These include staff compensation related to documentation and drawings, security and safety staff, any temporary staffing people, runners, direct payment to subcontractors and then all the related taxes to local and state agencies.
  • Advertising, Marketing and Public Relation Fees: These can be for sales and leasing activities, such as brochures, websites and on-site signage, open houses and community-related activities.
  • LEED Certification: Again, this can impact both hard costs and soft costs. Acquiring certification can add roughly $100,000 to soft costs depending on how big the project is.
  • Post-construction Soft Costs: These might include legal fees that have not been settled, sales and leasing fees, building management fees, repair and property maintenance insurance, replacement costs, landscaping, security, insurance and taxes.

The Importance of Identifying Hard Costs vs Soft Costs

The terms hard costs and soft costs are used to help project managers estimate the budgets for their construction project management builds. They differentiate costs associated with the project, and the proportion of hard costs vs soft costs can vary wildly from one construction project to the next.

Identifying all your hard costs vs soft costs is a key component to running a successful construction project. Construction costs will impact your return on investment. Therefore, you need to take the time to analyze your budget and be sure it’s as thorough and accurate as possible before making the investment.

Once you have accurate accounting for your construction project budget in place, you’ll need to track those expenses as you move through the project life cycle. This is the only way to make sure that you’re not overspending either hard costs or soft costs.

Having construction project management software will give you the means to monitor expenditures and see if you’re keeping to your budget. This knowledge lets you adjust your time, cost or scope to keep your project viable. Using a project management tool is essential to managing a construction budget.

Control Hard and Soft Costs with ProjectManager

ProjectManager is a construction project management software that helps you manage your budget and costs on a construction project. You can set up your budget for the project, calculate costs and see the budget variance as you execute your project to help you keep on track. Plus, it’s done in real time, so when something happens you’ll know immediately.

Create Interactive Project Plans

When you’re planning your budget, you need to itemize every task and the related resources needed to complete them. ProjectManager’s interactive Gantt chart is one of the multiple project views that gives you the ability to manage both resource costs and general costs, both as planned and actual costs. This includes human and nonhuman resources. Once you set the baseline, you’ve captured the plan and can track your planned versus actual effort to make sure you’re staying on budget.

ProjectManager's Gantt chart

Track KPIs in Real-Time

When you want to monitor your costs there’s the real-time dashboard, which populates automatically. For more details, use the one-click report feature. You can get cost information for your project or portfolio status, cost, variance, timesheets and much more. Your reports can be easily shared as a PDF, Excel, CSV file or printed out to use when presenting project updates to your stakeholders.

ProjectManager's status report filter

Track Costs and Time on Timesheets

Another way to track costs and time is with ProjectManager’s secure timesheet feature. Contractors and subcontractors can use the tool to log hours, streamlining your payroll operations while offering time management tools. Auto-populate timesheets to save time and track how long your team is spending on their tasks. Timesheets are locked, secured and saved to help you control labor costs, forecast project costs more accurately and adds security to your payroll process.

Timesheet view in ProjectManager

ProjectManager is award-winning software that organizes tasks, teams and budgets for construction project management. Our hybrid work management tool is designed to connect distributed teams and allows them to work how they want to regardless of their skill level. Join the 35,000-plus professionals already delivering success at organizations as varied as NASA, Siemens and Nestles. Get started with ProjectManager today for free!

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