Indirect Cost Series: Part Two – Cost Pools and Developing an Indirect Cost Rate

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In part one of our indirect costs series, we focused on what indirect costs are and why they are important to contractors. In this post, we will discuss cost pools and how to develop an appropriate indirect cost rate to allocate indirect costs to your construction projects.

As discussed previously, indirect costs are costs that directly arise from contracts but are not easily attributable to individual projects. Due to this, a rate must be determined to allocate these indirect costs to particular jobs. Before determining a rate you must determine how to accumulate indirect costs into cost pools.

Understanding Cost Pools

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