The cost of a construction project is an important aspect for everyone involved to consider. Learn more about the breakdown of construction costs with Trackunit. 

Constructing a building, facility, or infrastructure component can be complex and expensive. 

Construction project managers have a lot on their plates both logistics and cost-wise. They are in charge of hiring and paying the right AEC (architecture, engineering, construction) and contracting teams, acquiring materials, obtaining permits, and completing everything within a set timeframe.

Most managers use a cost breakdown to stay organized. These breakdowns allot fractions of the budget to the various parts of the process, helping owners finish their projects on budget and contractors protect their profit margins.  

This article will look at what a cost breakdown is and what should be included. We’ve also included some examples below to help you better understand and evaluate your next project cost breakdown.

What is a construction cost breakdown? 

Preparation is key, especially in a sector with a high potential for unforeseen challenges. 

A construction cost breakdown is a comprehensive list showing the costs of every expense in a construction project. It divides everything into categories like labor, materials, equipment, and overhead costs, helping construction managers put every dollar to good use. 

Proper breakdowns and budgeting help managers plan and schedule the project, identify cost-saving opportunities, and avoid financial risks early in the build process so the project stays within the budget. 

It also helps increase transparency and accountability between stakeholders. With an accessible cost breakdown, clients, contractors, subcontractors, managers, and owners can stay on the same page.

Benefits of an accurate breakdown structure 

• Precise budgeting: Enables teams to plan things item-by-item, enhancing clarity and prioritization. 
• Quicker, better decisions: Clearer insights on the available finances help managers make decisions on the fly and identify the most cost-effective options.
• Easier cost tracking: A set plan helps managers keep expenses within the constraints of the budget. 
• Improved Communication: With more visibility and control over a project’s financial management, conversations with stakeholders can be better supported with transparency and accuracy. 
• Plan better for the future: Accurate planning not only improves your current projects but provides a valuable reference point for future ones. 

What costs should be included in a cost breakdown structure?

There are many factors to consider when it comes to  a construction project cost breakdown. It’s not uncommon to feel overwhelmed by the process. We’ll organize it into components to help you out. 

There are three types of costs: 

• Hard costs: Expenses that are directly related to the physical construction (materials and labor) 
• Soft costs: Expenses that are necessary but aren’t directly related to the building part (taxes, permits, vendor costs, etc.) 
• Other costs: Expenses that don’t fall under the other two categories but must be considered (overhead and contingency budgets). 

So, what is the breakdown of costing in construction? Here’s a look at the different expenses to consider. We’ve also included a construction cost percentage breakdown for a general idea of how much you can allot to each. Important note: These numbers are estimates; percentages can be adjusted based on specific project characteristics and conditions. 

Labor (20-40%) 

Workers and AEC teams won’t work for free. Labor can account for up to 40% of the budget, with wages, benefits, and training for skilled and unskilled laborers.  

This category includes: 

• Wages (and varying wage rates across different jurisdictions) 
• Payroll taxes
• Insurance and compensation 
• Holidays and overtime
• Cost of recruitment and training 

It also includes the time spent planning, supervising, and managing construction projects. 

Materials (30-40%)

Materials are the costs of raw goods that will be used during the build. These include raw, foundational materials such as wood, steel and concrete, as well as paint and fixtures. 

Prices can fluctuate significantly based on market conditions, meaning managers should monitor prices carefully to source materials as cost-effectively and environmentally conscious as possible. This can help construction businesses meet their budget and sustainability goals.

Precise estimation is key to keeping things on budget. 

Equipment (rental or purchase)  (5-10%)

This category involves all the construction machinery and tools you will need to build your structures, from excavators and cranes to hand tools and safety equipment. 

To save money on storage and ownership, some construction businesses rent heavy machinery for projects. If you choose to, remember to factor the right costs into the budget as well. 

Wise management involves considering different rental options, maintenance schedules, and lifespan of machinery to optimize your investments.

It’s important to separate materials and equipment costs. Sometimes, there can be a gray area between the two, but do your best to split them for an accurate cost estimate. 

Overhead Costs (5-10%)

Overhead costs encompass all the background expenses required to keep a construction business operating but are not directly attributed to specific projects. This includes office rent, utilities, taxes, marketing, administrative salaries, and software subscriptions. 

Consider these as part of the budget since they are necessary to keep your construction business afloat. 

Regulations, permits and associated costs (2-5%)

These are some of the expenses critical to the feasibility and compliance with local regulations. Companies must obtain the necessary permits to build and cannot lay a single brick without them.

Also note the region you are in, as different geographical areas will have different regulations to adhere to. 

Additional vendor costs (2-5%)

These are the necessary services and supplies that keep your project and job site efficient and secure.

This category includes the cost of setting up necessary utilities, IT infrastructure, workplace safety signage, and security installations (cameras, drones, staff, etc.). Managing these costs helps ensure your project is safe even after hours. 

Contingency and risk management budget (3-10% of hard costs)

Construction is complex, and sometimes unforeseen issues arise. Think of this as your financial safety net to protect your bottom line from unpredictable hurdles. Allocating a portion of your budget as a backup fund allows you to adapt without compromising project quality or financial viability. 

Various elements influencing a construction cost breakdown

As you begin to consider the type of structure you want to build, it’s important to start budgeting for pre-construction costs, and unexpected ones too.

Several factors can influence a cost breakdown, including project scope, size and location, and the state of the market. Here’s a look at things that can impact pricing. 

• Project scope: In other words, all that it will entail will determine the quantity and quality of the materials, labor, and equipment needed. An extension of an existing building vs. the demolition and reconstruction of an existing building have different depths and breadths. 

• Project size can sway the final bill. For example, a medical office space will cost significantly less than a multi-story hotel or a stadium, so factor this upfront, for easier planning later.

• Geographic location can also be a major factor in determining the price. Sites in remote areas may face higher transportation fees for materials and equipment, but building on prime real estate is usually more pricey. 

Additionally, the climate region may impact the price of materials and finishes. For example, the need for durable and weather-resistant materials and finishes may cost more in the northern and Midwest regions of the US, where snow and ice storms are more common. 

Regions prone to natural disasters may require specialized construction techniques and materials.

• Inflation and market conditions: In times of high inflation, the cost of goods and services typically increases, impacting the cost of materials and labor. Market conditions, such as supply chain disruptions or increased demand for construction services, can also lead to higher project expenses.

Price and availability of materials: The cost of construction materials can also fluctuate due to global and market trends. Supply shortages and higher demand can drive up prices, affecting the budget. Additionally, the availability of materials may influence the choice of construction methods and timelines, potentially leading to increased costs.

How to estimate your construction costs

It’s a good idea to estimate the total construction costs of your project. 

While there’s no one-size-fits-all solution to estimating construction costs, there is a general process that most construction teams follow before they start building. Here’s a quick guide on how to price a construction project. 

1. Perform a preliminary evaluation of the site – This initial step is a thorough examination of the construction site to identify any potential issues that could impact the project, like topographical issues, soil quality, and access to utilities. Getting this information early helps you scope the project and estimate your work hours more accurately. 
2. Assess information for projected materials and a detailed project scope – Gather detailed information about the materials required and outline a comprehensive project scope. Cover everything from the basic structure to finishes, so you remember to include all aspects of the project in the budget.
3. Estimate material costs – Use estimating software or detailed price lists to calculate the cost of materials. You’ll need up-to-date pricing and should account for quantity discounts, shipping charges, and taxes where applicable. Automation via software can eliminate human error. 
4. Create a rough timeline – This helps you understand how long each resource will be needed, which will ultimately affect the cost estimation for labor and rental equipment. A well planned timeline can minimize delays and idle time.
5. Estimate the cost of labor and equipment rentals – Based on your timeline, calculate labor costs, including employee wages, benefits, insurance, and taxes. For speciality workers or subcontractors, include their fees and any government fees or taxes associated with their work. Also add the cost of renting any necessary equipment. 
6. With these estimates, multiply the total of your projects by the estimated rate per square foot – Use one square foot as a guideline to multiply how much it will cost to build the entire structure, then add the prices of mechanical and electrical installations. 
7. Remember to account for overhead and profit – Include overhead costs, such as office expenses, utilities, and transportation, in your cost estimate. Also, add a reasonable profit margin to help your business meet its bottom line.
8. Draft your estimate – Combine all the gathered information to draft a comprehensive estimate. This should be a detailed document that includes all the aspects above and should be presented in a way that’s clear for stakeholders to follow. 

Tips for best practices: 

• Eliminate manual work where you can and use software 
• Create and use a checklist 

How to make a cost breakdown (with example) 

To help explain, we’ve provided a construction cost breakdown example. 

Due to an influx of children in a newer residential area in Southern California, the state has decided to build another high school, which costs about $463 USD per square foot according to recent statistics from this year.

Using the unit pricing method (finding each cost per square foot), if the school is to be 200,00 sq. ft., the total cost of the project would be: 

200,00 sq. ft. x 463 = $92,600,000 USD ($92.6 million USD)

The following cost breakdown table gives an approximate guideline for this project:  

Usage	%	Cost (USD)
Labor	20-40%	$18.5 – 37.04 million
Materials	30-40%	$27.78 – 37.04 million
Equipment (rental or purchase)	5-10%	$4.63 – 9.26 million
Overhead costs	5-10%	$4.63 – 9.26 million
Permits, regulations, etc.	2-5%	$1.85 – 4.63 million
Vendor	2-5%	$1.85 – 4.63 million
Contingency	3-10%	$2.78-92.6 million
Project X		Total cost: $92.6 million (at $463 per sq. ft.)

A residential or commercial construction cost breakdown would be similar; first identifying the project size scope, then calculating the pricing per square foot. 

Minimize your construction costs with Trackunit 

Here at Trackunit, we understand that efficient, cost-effective construction is better construction. We have a suite of tools built to streamline your processes and boost productivity so you can deliver better results faster. 

We also understand that since most modern construction can’t be done by hand, your equipment is essential to the success of your project. Downtime is one of the toughest challenges in construction today — when your machines don’t work, neither can you.  

Our software is specifically designed to connect your machine fleet so project and fleet managers can keep their equipment up, running, and ready to use. 

Trackunit Manager provides you with a total overview of your entire fleet. This solution helps you track the movement and status of your vehicles from a customizable dashboard. 

Trackunit Go, a portable version of this solution, gives you complete visibility of your entire fleet of vehicles. Managing or renting out vehicles across multiple job sites? No problem. Our solutions harness the power of GPS tracking and real-time alerts, so you can keep tabs on each machine’s location at any time of the day, minimizing idle time and theft. 

Trackunit Go’s intuitive map shows you exactly which assets are currently working, moving, or stopped and even provides a turn-by-turn navigation option to quickly locate malfunctioning equipment. 

Trackunit Go makes it easy to approve scheduled services with just one tap, and add new maintenance schedules from the same platform. For equipment with a CAN bus connection, you’ll see advanced sensor values like fuel consumption, engine speed, oil temperature, etc., in a simple, user-friendly layout.

For more information on how we can eliminate downtime on your job sites or to request a demo, fill out the form below. 

Construction Project Cost Breakdown FAQs

What is the cost breakdown structure of a construction project?

Cost Breakdown Structure, also known as CBS or “should-cost analysis” is a comprehensive document that helps track and manage the various expenses of a project. It’s a great tool to keep stakeholders in the loop by categorizing expenses and increasing transparency. 

What is the breakdown of project cost?

A project’s cost breakdown consists of all expenses required for its completion, including but not limited to materials, labor, equipment, services, administrative expenses, and any unforeseen costs that may arise during construction.

How to calculate the cost of a project?

To calculate the cost of a project, assess and combine the hard and soft costs (direct and indirect project expenses), vendor expenses, and estimated operational costs, while also allocating resources for any potential unexpected expenses. 

Multiply the size of your projected project by the cost by square foot for an approximate total cost to complete the construction job. 

What is the difference between a budget and a cost baseline?

These terms are often conflated, but they mean different things. A project budget is the estimation of the total cost and can be subject to change. Conversely, a baseline is an approved budget and is set in stone.