What are "soft costs" in the context of construction?

In the context of construction, "soft costs" refer to non-physical expenses that are essential to the completion of a project but do not involve the actual construction work itself. This includes a variety of expenditures, such as permits, legal fees, inspections, project management fees, and administrative costs. Unlike hard costs, which encompass the direct physical construction expenses such as labor and materials, soft costs can have a significant impact on the project's overall budget and timeline.

Understanding soft costs is crucial for effective construction cost estimation, as they can account for a substantial portion of the total project cost. For instance, obtaining necessary permits can take time and may require fees that influence both the financial and scheduling aspects of a project. Contingency fees are also considered soft costs, as they are budgets set aside to address unforeseen expenses typically encountered during a project.

Thus, identifying and planning for these non-physical expenses is critical to managing the overall financial health of a construction project and achieving successful completion within the desired parameters.