The term “general conditions” in construction cost parlance describes expenses that support a project without directly relating to job site activities like pouring concrete or mounting steel beams. Experts also often refer to these as “soft costs.”
The associated infrastructure and equipment do not get handed over to the client along with other components (including the structure itself) following the project’s completion.
Keep reading to learn more about general conditions construction costs, including where they fit into the project planning process.
Examples of general conditions construction costs
Here are a few expenses commonly placed in the general conditions category. This is not an exhaustive list, mind you. The general conditions category can include many hundreds of expenses. However, this list should give you an idea of what constitutes general conditions.
Naturally, there are costs associated with these activities. The most obvious of these would be the staff’s salaries.
Administrative project costs
Of course, administrative tasks don’t end once the project begins. Away from the job site, staff members carry on with tasks such as payroll and addressing human resource concerns.
Without this work, the project would grind to a halt. However, because these costs are not directly related to manual labor on the job site, they’re classified as general conditions.
Project equipment and utilities
This category contains expenses such as dumpsters, fencing, temporary lighting, and site office utilities.
These costs differ from things like bulldozers and jackhammers, both of which might be absolutely essential for project delivery. The aforementioned general conditions, however, support the entire project in a more indirect sense.
If a project requires permits, these will also typically be lumped in with general conditions. Permit fees include any costs (including staff member salaries) incurred during the process of receiving the legal authorization required for work to commence.
When construction companies take on loans to cover project costs, the associated interest will typically be included among general conditions.
Many taxable events typically occur during large-scale construction projects. These taxes – and any fees associated with handling them (i.e. accountant wages) fall under general conditions.
Construction project management is a term broadly describing a whole laundry list of activities that support work on the job site. There are seven areas of focus when it comes to construction project management:
Each of these costs falls under the category of general conditions.
Public-facing construction companies often incur costs associated with maintaining their reputations and other advertising-related concerns. These expenses meet the criteria of general conditions.
Worker accommodations, amenities, and additional compensation
Often, construction projects require workers to relocate or even just travel long distances to the job site. This category covers expenses related to that travel, including hotel bookings, compensation for gas, and air travel.
Job site setup and cleaning costs
Costs in this category cover the initial setup of a construction project along with the cleanup that happens once everything’s complete. These costs fall under general conditions.
Why general conditions construction costs matter
General conditions can heavily influence a project’s financials. In fact, profitability may hinge on a company’s ability to create accurate general conditions construction cost estimates and incorporate those figures into their planning.
Take another look at the examples in the previous section. These aren’t necessarily minor costs, especially on larger construction projects. When companies don’t account for them, they may end up with a completely inaccurate understanding of their profit margins.
This can have devastating implications down the line. Say, for example, a construction company thinks they have a $5 million surplus on a particular project, unaware that $2 million of that figure is actually being eaten up by improperly-tracked general conditions.
The company could conceivably overextend itself by allocated those resources – which it doesn’t actually have – elsewhere.
Difference between general conditions and general overhead
It’s worth noting that general conditions differ substantially from general overhead.
You see, general conditions are attached to a specific project. General overhead, meanwhile, consists of expenses a company incurs as part of simply staying open (i.e. leasing office space and paying administrative staff, neither of which are attached to a specific job).
Here’s another way to think of it. General conditions are crucial for determining whether a project will be successful. General overhead, meanwhile, can help a company determine whether its entire operation is successful.
Tips for general conditions construction cost estimates
Next, let’s discuss some tips and best practices for ensuring your general conditions construction cost estimates are accurate.
Rely on data from past projects
Because general conditions can vary based on a project’s type, it’s crucial that you maintain reference points. You should be able to reference this data whenever you prepare general conditions construction cost estimates for similar projects in the future.
Of course, this all begins with appropriate tracking. From a resource management perspective, consider using software like our very own Bridgit Bench. This software will help you visualize resource allocations, which you can then use to determine how much capital is being allocated to specific tasks, including those that fall under the purview of general conditions.
Bridgit Bench also includes a forecasting feature that can help you project future needs, which you’ll find valuable for general conditions estimating.
Do your best to forecast fluctuations in pricing for materials and equipment
Here’s a general conditions estimate example.
Let’s say you’re looking to estimate the cost of job site fencing, which certainly falls into the category of general conditions. Months down the road, though, it’s possible the price of fencing may rise.
On large scale construction projects, companies may use futures contracts to secure very specific prices for materials and equipment. In other words, these contracts hedge against the possibility of those costs exceeding the strike price.
On smaller projects, companies may simply rely on building materials software that keeps track of prices across numerous vendors.
Whichever approach best meets your needs, it’s important you make an effort to forecast costs for items related to general conditions.
Be prepared to justify your general conditions
As you’ve probably noticed by now, the general conditions category contains relatively vague line items. As such, contractors are often asked to justify these expenses before a proposal is approved or reimbursement is issued.
You’ll have a much easier time getting your general conditions approved by:
- avoiding the inclusion of staff bonuses and other incentives; clients typically don’t want to pay for this
- being selective regarding listing equipment depreciation as a general condition; some clients may insist this constitutes general overhead
- ensuring the general conditions rates you quote are in line with market averages, even if you have alternative arrangements with suppliers
- maintaining records (including receipts) of transactions and passing those along with your requests for reimbursement
We hope this guide has helped you better understand the idea of general conditions as they relate to construction costs.
For more construction management explainers and tips, check out our blog.