Indirect Cost Series: Part Three – Contract Estimation and Change Orders

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This is part three of a five-part series on indirect costs.

In part two of our indirect cost series, we focused on developing cost pools and indirect cost rates to apply to contracts. In part three, we examine indirect costs in relation to contract estimation and change orders.

When estimating a long-term construction contract, costs to consider include direct material, direct labor, direct subcontractor, and other direct costs plus indirect costs multiplied by a target markup. In this calculation, contractors may overlook indirect costs, as they aren’t directly identifiable with the job. However, these costs must be taken into consideration to …read more

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