What does the term "hard costs" primarily refer to in construction?

The term "hard costs" in construction primarily refers to the direct expenses associated with the physical construction of a project. This includes material and labor costs, which are essential to the completion of any construction project. Hard costs encompass all tangible expenses that are necessary to advance the project from initiation to completion, such as the costs of buildings materials (like concrete, steel, and lumber) and the wages paid to workers directly involved in the construction process.

Understanding this distinction is important, especially in managing budgets and forecasting total project costs. Whereas administrative expenses, insurance, and bonding costs fall under soft costs, which are indirect expenses associated with the project, hard costs are more concrete and directly related to the physical build. Recognizing this classification helps in accurately estimating and controlling a project's financial performance throughout its lifecycle.