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    Direct and Indirect Cost

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    The document discusses definitions and categories of direct and indirect costs for project estimating. Direct costs are those that can be specifically identified with a particular project activity, while indirect costs cannot be identified with a specific activity. Common direct costs include labor, materials, and equipment involved in construction. Indirect costs include administration, insurance, and other shared expenses. The document provides a table that recommends whether common cost categories should be treated as direct or indirect for estimating purposes.

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    Direct and Indirect Cost

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    jopu
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    The document discusses definitions and categories of direct and indirect costs for project estimating. Direct costs are those that can be specifically identified with a particular project activity, while indirect costs cannot be identified with a specific activity. Common direct costs include labor, materials, and equipment involved in construction. Indirect costs include administration, insurance, and other shared expenses. The document provides a table that recommends whether common cost categories should be treated as direct or indirect for estimating purposes.

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    The document discusses definitions and categories of direct and indirect costs for project estimating. Direct costs are those that can be specifically identified with a particular project activity, while indirect costs cannot be identified with a specific activity. Common direct costs include labor, materials, and equipment involved in construction. Indirect costs include administration, insurance, and other shared expenses. The document provides a table that recommends whether common cost categories should be treated as direct or indirect for estimating purposes.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    851 views5 pages

    Direct and Indirect Cost

    Uploaded by

    jopu
    The document discusses definitions and categories of direct and indirect costs for project estimating. Direct costs are those that can be specifically identified with a particular project activity, while indirect costs cannot be identified with a specific activity. Common direct costs include labor, materials, and equipment involved in construction. Indirect costs include administration, insurance, and other shared expenses. The document provides a table that recommends whether common cost categories should be treated as direct or indirect for estimating purposes.

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    CHAPTER 7

    DIRECT/INDIRECT COSTS

    1. INTRODUCTION

    Estimates can be broken down into direct, indirect, contingency, and escalation costs.
    Standard definitions of direct and indirect costs provide consistency in estimating and
    reporting of project costs. This benefits program/project management, project
    validation, independent estimating and helps to provide uniformity in the departmental
    cost database. This chapter provides recommended categories for direct and indirect
    elements developed by the Committee for Cost Methods Development (CCMD) and
    describes various estimating techniques for direct and indirect costs.

    2. DEFINITIONS

    A. U. S. Department of Energy

    DOE Order 4700.1, PROJECT MANAGEMENT SYSTEM, states that direct costs
    include “...any costs that can be specifically identified with a particular project or
    activity, including salaries, travel, equipment and supplies directly benefitting the
    project or activity.” Emphasis is placed on the term “activity,” which is interpreted
    as being the same as a cost account.

    DOE Order 4700.1 states that indirect costs are “...costs incurred by an organization
    for common or joint objectives, and which cannot be identified specifically with a
    particular activity or project.”

    B. American Association of Cost Engineers

    The AACE defines direct costs as “...costs of installed equipment, material, and
    labor directly involved in the physical construction of the permanent facility.”

    The AACE defines indirect costs as “...all costs which do not become a final part of
    the installation, but which are required for its orderly completion. It includes (but is
    not limited to): field administration, direct supervision, capital tools, some start-up
    costs, contractor's fees, insurance, taxes, etc.”

    C. Table of Indirect/Direct Costs


    7-2 DOE G 430.1-1
    03-28-97

    For the majority of the activities, there is agreement as to whether it is an indirect or


    direct cost. Table 7-1 provides guidance for the treatment of some categories and
    indicates whether they are indirect or direct costs. The definitions of the categories
    or activities can be found in Appendix A.

    D. Type of Contract Cost Considerations

    The items considered a direct cost vary with the type of contract as follows.

    Type of Contract Direct Costs


    Fixed Price or Lump Sum Material and labor costs including
    payroll burden

    Cost Plus Fixed Percentage Material and labor costs including


    payroll burden, field and home office
    expenses, accounting, secretarial, and
    equipment, or all costs except the fee.
    DOE G 430.1-1 7-3
    03-28-97

    TABLE 7-1

    RECOMMENDED CATEGORIES FOR DIRECT/INDIRECT COST


    ELEMENTS

    CONSTRUCTION COST ACCOUNT DOE-CCMD COMMITTEE

    ACCOUNTING I

    ADMINISTRATION I

    AIRCRAFT OPERATION I

    BONDS I

    CAMP OPERATIONS I

    COMPRESSED AIR I

    CONST. CONTRACTOR’S ENG. I

    CONSTRUCTION D

    CONST. EQUIPMENT I1

    CONST. EQPT. MAINT. I

    CONST. FACILITIES I

    CONSUMABLES I

    CONTAMINATION RESTRICTIONS D

    CONTRACT FEE I

    CONTRIB. TO WELFARE PLANS I

    DEMOLITION D

    DRINKING WATER & SANITATION I

    ESCORTS D

    FIRE PROTECTION I

    FREIGHT D

    GENERAL CLEANUP I1

    HEAT I

    HOLIDAY & VACATION PAY I

    INSURANCE I

    LAUNDRY I
    7-4 DOE G 430.1-1
    03-28-97

    TABLE 7-1

    RECOMMENDED CATEGORIES FOR DIRECT/INDIRECT COST


    ELEMENTS

    CONSTRUCTION COST ACCOUNT DOE-CCMD COMMITTEE

    LEGAL I

    LIGHT & POWER I

    MAINT. OF GEN. CONST. PLANT I

    MATERIAL HANDLING I

    MEDICAL & FIRST AID I

    MOTOR POOL OPERATIONS I

    OFFICE SUPPLIES & EXPENSES I

    PAYROLL INSURANCE I

    PAYROLL TAXES I

    PERMITS, LICENSES I

    PERSONNEL I

    PREMIUM PAY D

    PROCUREMENT I

    PRODUCTIVITY D

    PROTECTIVE CLOTHING D

    REPORTING TIME I

    RETROACTIVE PAY I/D2

    SAFETY I

    SALES TAX I

    SCAFFOLDING I1

    SECURITY I

    SECURITY RESTRICTIONS D

    SIGNUP & TERMINATION PAY I

    SITEWORK I/D3

    SMALL TOOLS I
    DOE G 430.1-1 7-5 (and 7-6)
    03-28-97

    TABLE 7-1

    RECOMMENDED CATEGORIES FOR DIRECT/INDIRECT COST


    ELEMENTS

    CONSTRUCTION COST ACCOUNT DOE-CCMD COMMITTEE

    STANDARD EQUIPMENT D

    SUPERINTENDENCE I1

    SURVEYS, GEOL. STUDIES & TESTS I

    TAXES OTHER THAN PAYROLL I

    TRANSFER AND RELOC. I

    TRANSPORTATION OF WORKERS I

    WAREHOUSING I

    WATER I

    WELDING TESTS I

    1
    INDIRECT ONLY IF NOT ASSOCIATED WITH A PARTICULAR WORK OPERATION.

    2
    HOLDING ACCOUNT; ONLY UNALLOCATABLE COSTS SHOULD REMAIN IN THIS ACCOUNT.

    3
    DIRECT IF PERMANENT, OTHERWISE INDIRECT.

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