What defines “soft costs” in construction?

“Soft costs” in construction refer to indirect costs that are not directly tied to the physical construction of a project. These costs can include expenses for services such as architectural and engineering fees, permits, insurance, legal fees, and project management. Unlike hard costs, which encompass tangible expenses like materials and labor, soft costs typically relate to the overall planning, administration, and management aspects of a construction project.

Understanding this distinction is crucial for managing a construction budget effectively, as it allows contractors and project managers to allocate resources appropriately and anticipate all potential expenses beyond just the physical build. Soft costs can significantly impact the overall financial health of a project and are essential for both budgeting and forecasting.