Category: Quantities & pricing
Prepared by Eng. Ahmed Fathy, Projects Manager ·
Definition
Indirect costs are not tied to a single item but are needed for the project: site staff, accommodation and transport, insurance, site office and bonds.
Why it matters on a project
They are spread as a percentage over direct cost. Ignoring them is the most common reason small contractors lose money even when their item rates look fine.
Measurement and pricing
Usually a percentage of direct cost depending on project duration and size.
Worked example
Direct cost of 2,000,000 SAR with 12% indirect costs: 2,000,000 × 0.12 = 240,000 SAR.
Common mistake
Using one fixed percentage for every job regardless of duration; a longer job means higher overheads.
Frequently asked questions
What is a normal indirect cost percentage?
There is no fixed figure; it is built from an actual list of project overheads by duration, size and location.
Where do they appear in the BOQ?
Either in the preliminaries or spread across the unit rates of all items.
Related terms
- Direct costThe sum of material, labour and equipment cost of an item excluding overheads.
- Unit rateThe item price per unit of measure, built from material, labour and equipment then indirect costs and profit.
- Extension of time (EOT)The contractor’s entitlement to additional time for delay not of its making, subject to timely notice.
- Bill of quantities (BOQ)A list of work items with description, unit and quantity, priced item by item.
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