CEM 711 SUSTAINABLE CONSTRUCTION

DHA No: 6
Name: Neelotpal Tripathi Roll No: 1700657
Date:21/10/2020 B.TECH CIVIL (FINAL YEAR)
QUESTION: DIFFERENTIATE DIRECT COST AND INDIRECT COST RELATED
WITH CONSTRUCTION - CONCLUDE YOUR IDEAS WITH ONE CASE STUDY
TAKEN INDEPENDENTLY FROM CONSTRUCTION AROUND THE WORLD?
ANSWER:
Direct costs of a construction project: These are the expenses that are fixed upon a product,
function or facility. In construction projects, the direct expenses include workforce labour,
building materials and equipment – so fixed costs and quantity-proportional costs are included
in the overall direct expenses of a project. These costs are developed as estimates before the
project starts. Detailed analyses of the construction methods, site conditions, available resources
and building contracts are performed in order to accurately estimate the direct expenses.
Contractors need to factor in any subcontractor payments and equipment rentals into their direct
cost budget.
Common direct costs are often made up of materials, direct labor and subcontractor costs. There
is little ambiguity with these costs, and they are typically easy to apply or assign to a specific
construction contract
For example, If we produce 1000 m3 concrete in the batch plant. Then we need 300 tons of
cement to produce 1000 m3 concrete and 1 ton cement costs 100 $. So we need 30,000 $ to
purchase cement. This is your direct cost. As the quantity increases direct cost increase.
Indirect costs of a construction project: These are expenses that are not directly fixed – they
can vary depending on each project’s requirements and situation. Indirect expenses can include
time-related costs due to delays, additional security, administration and extra personnel costs.
These expenses do not have a direct connection with the building project and can grow over
time. The longer a project takes, the higher the indirect costs can be.
Indirect expenses can also be classified as overheads; whether project overheads or general
overheads. Project overheads are those expenses that are related to the actual project but cannot
always be directly allocated, such as parking fees, office rentals, workshop facilities and safety
costs.
General overheads include supporting expenses such as electricity tariffs, water tariffs, architect
fees, directors’ and managers’ salaries and supplier fees. All overheads can be estimated and
factored into the budget before a project starts. Most contracting companies make use of
checklists and forms to help them develop these estimates. These overheads can account for 5%
to 15% of the total project cost.
CASE STUDY OF COSTS INVOLVED IN A CONSTRUCTION PROJECT:
S.NO Description Direct Indirect
Costs(Value Costs (Value
in INR) in INR)
1. Labor 3,00,000 NA
2. Materials (Cement,Bricks,Aggregates,Flyash,Finishing 7,00,000 NA
Materials etc)
3. Subcontract 5,60,000 NA
4. Equipment (leased for exacavation,lifting of building 50,000 NA
materials etc.)
5. Other Costs 20,000 NA
6. Gasoline NA 1,25,000
7. Repairs and maintenance NA 1,10,000
8. Mechanics labor and burden NA 60,000
9. Depreciation NA 20,000
10. Insurance NA 55,000
11. Equipment lease NA 70,000
Net Cost of all Direct and Indirect Costs 16,30,000 3,40,000

NET COST OF THE CONSTRUCTION PROJECT: 19,70,000 (INR)