What do "direct costs" refer to in construction?

Direct costs in construction refer specifically to expenses that can be directly attributed or assigned to a particular project. These costs include materials, labor, and any other expenses that can be traced back to the construction work being performed. For instance, if a contractor purchases concrete specifically for a building project, that expense is categorized as a direct cost.

This concept is crucial for project budgeting and cost management. Understanding direct costs allows contractors to accurately estimate project expenses and ensure they remain within budget. Recognizing these costs helps in determining the profitability of a project since they directly impact the overall cost of completing the work.

In contrast, overhead costs, contingent costs, and regulatory compliance costs do not fall under the definition of direct costs, as they relate to the broader operational aspects of the business or unexpected events not tied to a specific project.