Forums » General » what is considered overhead in construction?
In construction, overhead refers to the indirect costs and expenses that are necessary to run a construction company or complete a construction project but cannot be directly attributed to a specific project task or activity. These costs are essential for the operation of the business and are spread out over multiple projects rather than being directly charged to any one project. Overhead costs are often associated with the general management, administration, and support functions of the company. Some common examples of overhead costs in construction include:
Office expenses: Costs related to maintaining the administrative and management offices, such as rent, utilities, office supplies, and equipment.
Salaries and benefits: Wages and benefits of administrative staff, project managers, and other personnel not directly involved in the construction process.
Insurance: General liability insurance, workers' compensation insurance, and other forms of coverage necessary for the construction company's protection.
Taxes and permits: Various taxes and permits required to operate the construction business legally.
Accounting and legal fees: Costs associated with hiring accountants and legal professionals for financial and legal services.
Depreciation: The reduction in value of assets over time, such as equipment and vehicles used in construction.
Equipment maintenance: Costs related to servicing and repairing construction equipment.
Safety programs: Expenditures for safety training, equipment, and programs to ensure a safe working environment.
Marketing and advertising: Expenses associated with promoting the construction company and attracting new projects.
General utilities: Costs for utilities used in both the office and on construction sites, such as phone services and internet.
It's important for construction companies to properly allocate and manage overhead costs to ensure that they are appropriately distributed across projects and do not negatively impact the overall profitability of individual projects. Overhead costs are typically factored into the company's pricing structure and are part of the overall cost estimation process for bidding on construction projects.