Understanding soft cost in construction is essential for anyone involved in building projects. These costs, often overlooked, encompass everything from design fees to permits and inspections.
While they may not be as visible as materials or labor, they play a crucial role in determining the overall budget and success of a project.
In this article, we’ll break down what soft costs are, why they matter, and how to manage them effectively.
What is soft cost in construction?
Imagine you’re about to build your dream home. You’ve planned out every detail, from the materials to the labor, and you think you’ve covered all the expenses. But then, the architect’s bill arrives, followed by fees for permits, insurance, and legal services.
These are soft costs in construction—the often-hidden expenses that don’t directly relate to the physical building but are crucial to making the project a reality.
Picture this: you’re in a meeting with your project manager, and they’re talking about how to keep the project on track. They mention costs like design fees, project management salaries, and even marketing expenses for commercial projects.
These are all soft costs. They might not be as tangible as the bricks and mortar, but without them, the project wouldn’t go from paper to reality.
Soft costs ensure that everything behind the scenes runs smoothly, from planning to execution, making them just as vital as the visible parts of your construction budget.
Why Soft Costs Are Just as Important as Hard Costs
Many people overlook soft costs in construction, focusing primarily on the tangible aspects like materials and labor. This oversight can lead to budget surprises and delays, impacting the overall success of the project.
Imagine investing all your resources into building your dream project, only to be blindsided by unexpected expenses like design fees, permits, and legal services. These soft costs might seem secondary, but they are essential for turning your vision into reality.
Ignoring them could mean facing unplanned financial strain, stalling your project, or even compromising on quality.
By giving soft costs the attention they deserve, you can create a comprehensive budget that accounts for every aspect of your construction project. Properly estimating and managing these costs ensures a smoother process, fewer surprises, and a final product that meets both your expectations and financial plan.
How to Accurately Estimate Soft Costs for Your Project
1. Identify All Potential Soft Costs: Start by listing all the non-physical expenses your project might incur, such as design fees, permits, legal services, insurance, and project management.
2. Research Costs: Gather information on the average costs for each item on your list. This can involve contacting professionals, reviewing past projects, or checking industry standards.
3. Consult Experts: Speak with architects, engineers, and project managers to get accurate estimates for their services. They can provide insights into any additional soft costs you might have missed.
4. Include Contingency: Add a contingency amount to cover unexpected soft costs. A typical recommendation is to allocate 10-20% of your total budget for this purpose.
5. Regularly Review and Adjust: As your project progresses, revisit your estimates and adjust them as needed. Staying flexible helps you account for any changes or new expenses that arise.
Say good bye to cost overruns with Opteam
Managing a construction project can feel like trying to balance a budget on a tightrope. Unexpected costs, hidden expenses, and mismanaged funds can easily tip you into financial trouble. But with Opteam, you can keep your budget in check, every step of the way.
Opteam is the all-in-one construction planning and scheduling software designed to keep your costs under control. Here’s how:
- Schedule Checks: Ensure every task is completed on time with Opteam’s robust scheduling features. Upload your Primavera P6 files and let Opteam analyze your schedule, providing suggestions to optimize timelines and avoid potential delays & cost overruns.
- Progress Tracking:Â Stay updated with real-time progress tracking. Opteam gives you a clear picture of where your project stands, so you can make informed decisions quickly.
- Real-Time Project-Delay Analysis: Anticipate delays before they become a problem. Opteam’s powerful analytics provide insights into potential delays, allowing you to adjust plans and keep your project on course.
With Opteam, you’re not just managing costs—you’re securing your project’s financial success. Keep your construction projects financially sound with the software that’s built to manage the complexities of budgeting.
Final words
Understanding and managing soft cost in construction is key to the success of any building project. Through accurately estimating and keeping track of these often-overlooked expenses, you can ensure that your project stays on budget and progresses smoothly.
Remember, while they may not be as visible as hard costs, soft costs are essential to turning your construction vision into reality.
Plan wisely, manage diligently, and your project will be well on its way to success.
