Indirect cost

Also called indirect job cost, burden, shared cost

Definition

A cost that supports the work without belonging to one job: yard rent, trucks, tools, insurance, shared supervision. Recovered through the overhead rate, not a job.

Indirect costs sit between a job's direct costs and the office's overhead. A superintendent who covers three sites, a truck that serves every job, the compressor and the ladders, the yard where material waits: each is a real cost of building, and none belongs to one job. Larger contractors allocate them to jobs by a formula; small contractors are usually better off treating them as part of the overhead rate and pricing every bid to recover it.

A worked number

Trucks, fuel and repairs $18,000 a year; tools and equipment $6,000; yard and storage $9,000. That $33,000 of indirect cost on $560,000 of revenue is nearly six points of overhead rate on its own. A contractor who thinks of overhead as "the office" and prices it at 10% has just under-recovered $33,000 before the office is counted.

The mistake it hides

Charging indirect costs to whichever job the truck happened to be at when the repair bill came. It makes that job look bad and every other job look good, and neither is true. Consistency is the whole point: the same kind of cost lands in the same place every time.

In Obra

Indirect costs stay out of the project ledgers on purpose; they belong in the overhead rate the overhead calculator computes, which sets the margin every bid needs. A cost that is genuinely job-specific, like a rental for one site, is recorded on that job.

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