Summary of Total Project Costs

Direct Costs: Indirect Costs:

Material Costs Subgroup or “pools”
Labor Costs Fringe Benefits
Equipment/Tools Costs Overhead
Sub-contractor Costs General and Administratives
Contingencies
Miscellaneous
Taxes
Bonds
Insurance
What is Total Project Costs?

•It is the sum or total of the

following costs
Basic Contents of Typical Construction
Project Costs
• Professional Engineering Costs
• Construction Costs
• Legal and land Costs
• Owner's costs
• Contingency allowance for unknowns
Basic Contents of Typical Construction Project Costs:
Professional Engineering Costs
These are costs derived from the works of
engineers/Consultants
• Cost of study and report phase
• field or traffic surveys
• planning analysses
• geotechnical explorations and analyses
• Costs of coordination, evaluation, implementation and
compliance
Basic Contents of Typical Construction Project Costs:
Construction Costs

• The estimated total costs of constructing the

facility to be covered by the proposed detailed
design or construction supervision service.
• Material Costs
• Labor Costs
• Equipment/tools Costs
Basic Contents of Typical Construction Project Costs:
Legal and land Costs

• Audits
• Cost of Issuing Bonds
• Land Costs
• Interest for borrowed money during
construction
Basic Contents of Typical Construction
Project Costs:
Owner's costs
• project administration
• staffing,
• financing, and
• other overhead
Basic Contents of Typical Construction Project
Costs:
Contingency allowance
• These allowance is for unknown expences
• Miscellaneous
• In common practice:
• 20% or more if only study and report phase
• 10%-20% if final designs are established
• 5%-10% if construction bids are known
Labor, material, equipment,
and subcontractor costs
Labor Costs
• Direct Cost
• the total cost of all labor used in a business
(construction)
• Labor rate varies
• per location
• per employee designation (skilled, non-skilled
labor/worker)
• with time (project with long duration should consider this)
Material Costs
• the cost of raw materials used to manufacture a
product or provide a service.
• Excluded from the material cost is all indirect
materials, such as cleaning supplies used in the
production process.
Equipment and/or Tools Costs
• Equipment/Tools Cost means the amount Lessor pays
for the Equipment/Tools and any similar costs with
respect to the Equipment/Tools
• Rental Cost
• Purchase Costs
• Lease Cost
• Operating Costs
• Maintenance Costs
Sub-Contractor Costs
• What is Sub-contracting?
• employ a business or person outside one's company to do (work)
as part of a larger project.
• in construction, the General contractor will hire another contractor
or people outside their company to do a small portion of the
project. This people work for the GenCon.
• all costs incurred by subcontractors for the project, including
labor and non-labor costs.
Labor fringes, Overhead and
G&A
https://aronsonllc.com/what-is-the-difference-between-fringe-overhead-and-ga/
Labor fringes
• A phrase used to communicate
the total compensation of a
salaried employee. Fringe
benefits are often a significant
percentage of a person's salary.
• Fringe Benefit Tax Explained
• https://www.youtube.com/watch?
v=cZ7Lo_w3Yt0&feature=share
• Common example of fringe benefits
• health insurance
• life insurance
• tuition assistance
• childcare reimbursement
• cafeteria subsidies
• below-market loans
• employee discount
• employee stock options,
• personal use of a company-
owned vehicle
Common Example of Overhead Costs
• Small business personnel
commonly wear multiple hats
and often need to divide their
time between many categories.
Indirect labor is categorized
based on what you are doing at
the time. Overhead labor might
be, for example, a meeting with
project managers and/or the
direct labor force that does not
fall under the statement of work.
• The travel costs incurred to get you to
the aforementioned meeting.
• Fees and costs associated with hiring
direct employees. This could include
the labor time for your HR person to
do interviews, the costs of obtaining
security clearances, outside
recruitment fees, and the cost of job
advertising.
• A proportionate share of total
facilities costs (e.g., rent, office
supplies, IT services, telephone costs,
etc.)
General and Administrative (G&A) expenses
Common examples
• Labor for strategic planning, • Business insurance (general
business development efforts liability)
and to manage or perform
administrative functions • State & local taxes (not federal
taxes!)
• Bonuses for people who
primarily charge their time to • Conferences, business meetings
G&A • Dues and subscriptions
• Professional fees, such as legal, • A proportionate share of total
accounting, payroll processing facilities costs
fees, IT services.
• Travel – perhaps in support of
business development efforts
Labor Taxes
• https://shieldgeo.com/payroll-and-tax-in-the-philippines/
ConstructionTaxes
• Who is responsible for securing and paying for construction permits
and licenses?
• Who is responsible for paying taxes?
• http://ciap.dti.gov.ph/content/section-ii-laws-regulations-site-
conditions-permits-and-taxes
Construction Taxes

Contractor
• income payments to certain
contractors are subject to 2%
Creditable Withholding Tax
(CWT)
Consultant
• income is subject to 5% / 10%
creditable withholding tax
(CWT), depending on the gross
income of the payee

https://home.kpmg/ph/en/home/insights/2020/10/understanding-consultant-vs-contractor.html
Bond and Insurance Costs
Bonds
• a type of surety bond that
protects against disruptions or
financial loss due to a
contractor's failure to complete
a project or failure to meet
contract specifications. These
bonds ensure a construction
project’s bills will get paid.
Insurance
• a contract, represented by a policy,
in which an individual or entity
receives financial protection or
reimbursement against losses
from an insurance company.
• broad categorization of insurance
policies that provide protection
during construction projects
Three main types of Bonds
• Bid bonds
• is a guarantee that you provide to the project owner stating that you have the capability to take on
and implement the project once you are selected during the bidding process. However, because of
a bid bond, they will be more comfortable awarding a project to a contractor knowing that if the
project fails, they can collect compensation from the surety bond.
• Performance Bonds
• will protect the owner against possible losses in a case a contractor fails to perform or is unable to
deliver the project as per established and the contract provisions. Sometimes the contractor
defaults or declares himself in bankruptcy, and then in those situations, the surety is responsible
to compensate the owner for the losses.
• Payment Bonds
• a three-way contract between the Owner, the contractor and the surety, to make sure that all
subcontractors, laborers, and material suppliers will be paid leaving the project lien free. A
Payment Only Bond is rarely requested and is billed usually at about 50% of the regular premium.
Common Types of Construction Insurance
• Builders Risk (Course of Construction) Insurance (CARI)
• will pay for damages up to the coverage limit. The limit must accurately
reflect the total completed value of the structure (all materials and labor
costs, but not including land value). The construction budget is the best
source for determining the appropriate limit of insurance. Builder’s Risk
insurance policies can often be written in terms of three-months, six-months,
or 12-months.
• Workers’ Compensation Insurance
• a type of business insurance that provides benefits to employees who suffer
work-related injuries or illnesses. Specifically, this insurance helps pay for
medical care, wages from lost work time and more.
Profit
• https://www.dpwh.gov.ph/DPWH/sites/default/files/issuances/DO_0
29_S2011.pdf