Total cost

The term ‘cost’ in the construction industry generally refers to the amount that has to (or will have to) be paid to receive goods or services.

The total costs associated with a development may consist of a number of components.

Total costs will include construction costs, that is, those costs incurred by the actual construction works themselves, on some projects determined by the value of the contract with the main contractor. However, the construction contract may include costs that might not in themselves be considered literal construction costs (hard costs), such as fees, profits, overheads, and so on, and there may be construction works that are awarded by the client outside of the main contract (such as fitting out the interior, minor alterations to the completed works, installation of equipment, and so on).

In addition, there will be other costs associated with a development, such as land acquisition costs, fees for letting agents, marketing costs and contributions associated with planning permissions.

These are generally considered to be capital costs. However, beyond the completion of the construction contract, there will be other costs associated with operating the development which may not be capital costs, and ultimately, there will be costs associated with the demolition, deconstruction or disposal of the development.

Cost may also have wider interpretations, such as the environmental cost or the social cost of a particular purchase or action.

NB The Chartered Institute of Procurement & Supply (CIPS) Glossary of procurement terms, defines total costs as: ‘The total amount of costs spent, including fixed, variable, direct and indirect costs’

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