Overhead Costs in Construction

Overhead costs in construction are a part of the cost of works under the estimate documentation, which takes into account all costs associated with creating the required conditions for construction, commissioning and construction and repair work, as well as the organization of these works, management and maintenance.

Overhead costs in construction included in the estimated cost represent costs that are not directly related to the organization, maintenance and management of construction, which can not be attributed to a specific element or unit of construction products.

The account of overheads is spent according to the Methodical instructions of MDS 81-33.2004 from 12.01.2004.

These costs, as well as the norms for the consumption of materials in construction, are taken into account in compiling estimates in accordance with the methodological documentation.

The amount of overhead costs varies on average depending on the nature of the processes and the territorial affiliation of 12 to 20%.

The normative value of these expenditures shows the calculated average industry costs that are associated with the construction work and are included in the cost of construction products.

To determine the cost of construction at separate stages, a system of norms for overhead costs is used. These norms for functional purpose and scale are divided into the following types:

• Enlarged standards, characterizing the main types of construction;
• Standards for certain types of construction work;
• Individual standards worked out by a particular repair and construction or construction and installation organization.

Enlarged standards are determined on the basis of statistical observation data by types of construction. They are used to create enlarged investor's estimates and in the process of preparing documentation for conducting tendering tenders.

The standards for the types of work are used when drawing up design estimates and when calculating for work already done.

Individual norms are developed by contractors on pricing during construction on the basis of contracts with contractors. Projects of individual standards are subject to expert examination of the customer.

The norms of overhead costs are determined on the basis of the estimate-normative bases of 2001, which includes 86 types of works in the field of construction.

Overhead costs in construction are normalized as a percentage of the amount of the payroll or direct construction costs indirectly as part of direct costs.

Enlarged standards, as well as standards for types of installation and construction work are developed by special organizations-developers (centers of pricing for the construction of federal and regional level), which are subordinate to the Office of Pricing.

The methodical guidance for the development of standards is handled by the Pricing Management.

The size of overheads is determined when local estimates are compiled at the basic or current price level. The estimate includes not only the consumption of materials in construction, but also the overhead costs in construction that accompany all stages of the process.

The accrual of standards is made by the collections of GESNm-2001, GESN-2001 and GESNr-2001.

The composition of overhead costs, the items of which are consolidated by their intended purpose:

1. Administrative and economic (43.45%);
2. On maintenance of construction workers (37.32%);
3. On the organization of works on construction sites (15.7%);
4. Other expenses (3.53%), which include depreciation for intangible assets, advertising costs, payments on bank loans.
5. Costs that are not taken into account as norms, but attributed to overhead costs (insurance payments, taxes and other deductions, certification costs, employee payments by court decision, etc.)