Construction Soft Costs

When planning a construction project, it's easy to focus on the visible expenses—materials, labor, equipment—the tangible elements that bring a building to life. These are known as hard costs. However, there's another category of expenses that's equally important but often overlooked: soft costs.

So, what are soft costs in construction? Simply put, they encompass the indirect expenses that aren't directly tied to construction costs. For example, think of architectural fees, permits, insurance, and legal services. While they might not be as obvious as bricks and steel, construction soft costs play a crucial role in the overall success and budgeting of a project.

Understanding the distinction between construction hard costs vs. soft costs is vital for accurate budgeting and project management.

What are construction hard costs?

Hard costs are the tangible, physical expenses that go directly into building a structure. These are the costs you can see and touch—like concrete, steel, lumber, roofing, windows, and all the labor it takes to put it together. Basically, if it becomes part of the final building or is used to create it, it’s a hard cost.

This category also includes site work, equipment rentals, and utility installations—anything tied directly to the physical construction process. Because hard costs typically make up the bulk of a project’s budget, they’re often the first thing that comes to mind when people think about construction expenses.

But here's the catch: focusing only on hard costs can give you an incomplete picture. That’s where soft costs come in—and they’re just as important to budget for.

Examples of hard costs

• Concrete and foundation work
• Structural steel and framing materials
• Lumber and wood products
• Roofing materials and installation
• Doors, windows, and glazing
• Electrical wiring and fixtures
• Plumbing systems and materials
• HVAC equipment and installation
• Flooring, drywall, and interior finishes
• Masonry and brickwork
• Site preparation and grading
• Utility installation (water, gas, electric)
• Equipment rentals used for physical construction
• Labor costs for trades (carpenters, electricians, plumbers, etc.)
• Landscaping and exterior paving

What are construction soft costs?

If hard costs are what you can see and touch—like bricks, beams, and concrete—then soft costs are everything happening behind the scenes to make the project possible.

Think of it like a stage production: hard costs are the set, the lights, the props. Soft costs? They’re the script, the director, and even the permits to put on the show. You don’t always physically see soft costs, but without them, nothing runs.

Construction soft costs cover the services, fees, and indirect expenses needed to plan, manage, and support the build. This includes architectural and engineering fees, permits, legal services, insurance, and even financing costs.

These expenses don’t go into the physical structure, but they’re just as essential. Overlooking them can lead to budget shortfalls or project delays, especially on larger or more complex builds.

Understanding what soft costs in construction really are helps you build a budget that’s realistic—not just for the materials, but for the full picture from concept to completion.

What are the different types of soft costs?

• Design & Engineering Fees
  The cost of architects, engineers, designers, and consultants who plan and develop the project.
• Permits & Government Fees
  Building permits, zoning approvals, inspections, and any regulatory costs required to move forward.
• Legal & Administrative Costs
  Legal counsel, contract reviews, and administrative expenses associated with managing the project.
• Insurance & Risk Management
  Builder’s risk insurance, liability coverage, and other insurance required during construction.
• Financing Costs
  Loan interest, bank fees, and other costs tied to securing and servicing project funding.
• Project Management Fees
  Fees paid to general contractors, construction managers, or consultants managing the project timeline and coordination.
• Marketing & Pre-Opening Expenses (for commercial projects)
  Branding, signage, leasing teams, or grand opening events before the building is officially in use.

Examples of soft costs

• Architectural design fees
• Civil and structural engineering services
• Building permits and inspection fees
• Legal fees for contracts or zoning issues
• Construction loan interest and bank charges
• Builder’s risk and liability insurance
• Project management or consulting fees
• Environmental impact studies
• Utility connection and impact fees
• Marketing and sales expenses (for commercial or residential developments)

Best Practices for Managing and Controlling Soft Costs
Soft costs may not be as visible as building materials, but they can have a major impact on your project’s bottom line. The key to keeping them under control is treating them with the same attention and strategy you’d give your hard costs.

Start by building soft costs into your budget from day one. Don’t treat them as an afterthought—include line items for design fees, permits, insurance, and financing costs early in the planning phase.

Next, maintain clear documentation and contracts for all professional services. Scope creep in legal or design work can quickly inflate soft costs, so set expectations and track changes.

Regular reviews and updates are also essential. Just like with material prices, soft costs can shift. Revisit your estimates periodically and compare them to actuals to stay on track.

Finally, consider using project management software—or better yet, a platform like ALICE—that ties soft costs to your construction schedule and decisions. This makes it easier to forecast, adjust, and stay aligned across your team.

How Alice can help Include soft costs in your construction project budget

When most construction software focuses only on bricks, beams, and timelines, ALICE takes it a step further—bringing soft costs into the equation for a more complete, realistic project budget.

ALICE uses AI to simulate thousands of construction scenarios, helping you plan not just how to build, but how to build smarter. And because it connects your schedule with cost and resource data, you can factor in construction soft costs right alongside labor, materials, and equipment. Whether it’s design fees, permits, or insurance, ALICE ensures these critical expenses are part of the big picture, not just buried in the fine print.

By visualizing how changes in your plan affect both hard and soft costs, ALICE helps you make decisions that keep your budget—and your project—on track.

Ready to stop guessing and start budgeting like a pro? Book a demo with ALICE.