What is the main difference between direct costs and indirect costs?

The main difference between direct costs and indirect costs is that direct costs are expenses that can be directly attributed to a specific project or construction work, whereas indirect costs are overhead expenses that cannot be directly linked to one particular project. Direct costs include items such as labor, materials, and equipment specifically used for the construction activities, making them easier to allocate to a specific job.

Indirect costs, on the other hand, encompass expenses like administrative salaries, utilities, and office supplies that support the overall business operations but are not tied to any single project. Understanding this distinction is crucial for accurate budgeting and cost analysis in construction projects, as it allows coordinators to allocate expenses correctly and evaluate the profitability of specific projects versus the overall operation.