Understanding Hard Costs Related to Construction Projects

Understanding what are construction hard costs.

Construction contracts
Construction contracts can protect your business. Photo Brooklyn John

Hard Costs are tangible assets that you need to acquire to complete your construction project. Usually, hard costs are easily quantifiable and can be determined with such certain that usually they are detailed by an experienced estimator. In general, hard costs represent any part of the work or costs associated with the actual project.

Hard Costs Components

Below is a list of common construction hard costs.

  • Building Structure- Hard costs associated with the structure. This category includes all labor and material required to complete the whole building or structure. Everything that is quantifiable and can be estimated must form part of the hard costs.
  • Site- The difference from the first one to this, is that this category includes all utilities underground, aerial, water systems, drains, fire, paving, grading, etc.Like explained above, site piping, material used for paving, sewers, and site work are also part of the hard costs.
  • Landscape – Hard costs related to landscaping works, including grass, lawns, trees, mulch, shrubs, fertilizer, and every other material included in the construction of the projects based on the architectural drawings.
  • Contingency- Contingency is a reserved amount of money covering all estimated unforeseen conditions that might affect the construction process. Although it is not an amount that you can measure, it can be estimated from historical data between a five and ten percent of the total project costs for new projects and between 10 and 20 percent for remodeling projects.
    • Change Orders- Change orders might be included under the building structure item in the hard costs. Some builders separate this item from building structure, for accountability process, but it also includes all additional expenses related to the construction of the project. Insurance costs are normally not included as hard costs and the owner might ask you to submit those as separate line items.

      How to Estimate Hard Costs

      Now that you know that hard costs can be estimated or quantifiable, it's now time to understand the process of estimating these costs. The first step during the project planning is to provide a conceptual estimate. Conceptual estimate are preliminary estimates ranging between 30% and 50% accurate, and sometimes are developed doing parametric estimating or using a model During this phase contingency can be as high as 50%. The second stage during the estimating process is when the preliminary budget is developed, providing a range of accuracy between 15 and 30 percent. This estimated is completed using historical information, bids, proposals, and contingency is now reduced to 20%.

      Once the project is being designed, the estimator will review the information received and a definitive hard cost estimate will be developed. Now estimated and hard costs will be ranging between 5% and 15% accurate and are normally developed when design is at 75 or 100% completed. During this phase contingency is at 15% as more details emerge from the construction drawings and bids are received, general conditions have been determined and escalation costs are also built in in the estimate.

      Finally, hard costs are fully developed when complete plans, specifications, contracts and special provisions are received from the owner. Detailed estimates are developed, the level of accuracy is at 5% or lower and almost all contingency is removed as the scope has been completely defined.During this stage hard costs can be developed carrying only 0 to 10 percent contingency.

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