Direct costs are directly tied to the construction process and can be attributed specifically to the production of project deliverables. These costs typically include expenses such as labor, materials, and equipment that are necessary for the completion of construction activities. Since these costs can be traced directly to a specific project or task, they are clear and quantifiable, allowing project managers to allocate them effectively within the project budget.
In contrast, indirect costs are expenses that cannot be directly linked to a single project or activity. They cover overhead costs such as administrative salaries, utilities, and office supplies that support the overall operation of the project or business but do not contribute directly to the physical construction processes. Understanding this distinction is crucial for construction professionals, as it enables accurate budgeting and financial planning for projects.