Overhead – Lecture 9

1. Overhead – Lecture 9 CEE 474 – Engineering Project Management

2. Definition • Overhead (or indirect costs) – Those costs that cannot be attributed to a single item or unit of construction work. • In construction, indirects are divided between home office overhead (also called “G&A” and field office overhead, or HOOH and FOOH

3. Field Office Overhead • Clerical wages and salaries • Office Equipment • Field Office Building • Erecting and Removing Field Office Building • Field Staff • Superintendent • Quality Control • Safety

4. Field Office Overhead • Usually calculated on an item-by-item basis • For contractor modifications, paid for on a time basis ($/day) if there is a time extension

5. Real Field Office Overhead • Field Office Overhead.xls

6. Home Office Overhead • General overhead expenses incurred by the contractor in the overall management of his business. They are not usually charged to a specific project. • Calculated by dividing the home office expenses for a year by all the direct project expenses (field office, labor, material, subcontracts, etc.). This percentage is applied to all job costs. Usually 4% to 20%, depending on contractor.

7. Unallowable Overheads • On Federal projects, the Government only pays for allowable overhead costs. The unallowables are advertising, bad debt, donations, entertainment, interest, labor relations, and organization fees (incorporation).

8. Real Home Office Overhead • HOOH.pdf