Unravel the intricacies of cost categories and their pivotal role in organizing and allocating estimated costs of a construction project. Delve into the vital understanding of how every single aspect of a building structure holds unique dependencies on labor, material, equipment, or a subcontractor for installation.
Key Insights
- Cost categories are essential in organizing estimates for construction projects, helping allocate each estimated cost correctly.
- Every item included in an estimate needs at least one cost category, which could be labor, material, equipment, or a subcontractor, each carrying out specific roles in the installation process.
- While there are four primary cost categories, occasionally, some items might not fit into these categories necessitating an additional cost category, belying the complexity and depth of construction cost estimation.
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Let's talk about cost categories. What are they? To put it simply, we organize our estimate into categories so that it's easy to understand where we need to allocate each of the estimated costs. To go a little deeper on cost categories, it's important to understand that every single item to be included in an estimate that's part of a building structure is going to require labor and/or material and/or equipment and/or a subcontractor to do the installation.
Some items could be labor only—that's the time it takes to install it. Some can be material only.
Some could be labor and material. Let's take concrete, for example. It requires the labor to place the concrete, the material for the concrete, and it may also require the equipment to pump the concrete into place.
You could also have a subcontractor that comes in and says, “Nope, I’ll do all of it for my price, ” and then you'll have a subcontractor amount. These represent the four primary cost categories. There are times that some items, like special inspections, may not actually fit into these cost categories, and a fifth cost category could be added—such as “Other.”
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Aside from that, most of your costs will fall into one of the four primary cost categories. It's important to understand that every item in your estimate must have at least one cost category. So let's take a closer look at these four main cost categories.
