If you’re a new or growing construction contractor, you’ve likely encountered the puzzle of separating fringe costs, overhead costs, and general & administrative (G&A) costs. Understanding these three indirect cost pools is critical for accurate estimates—and for protecting your bottom line.
This post breaks down the differences between fringe, overhead, and G&A costs. Then, we’ll explore how Estimating Link can take the confusion out of allocating and tracking these expenses in your bids.
Fringe Costs
What Are Fringe Costs?
Fringe costs (or fringe benefits) encompass expenses tied to your workforce, such as health insurance, retirement contributions, paid time off, and holiday pay. They may also include perks like commuting benefits, tuition assistance, or employee discounts. These costs encourage retention and help you attract top talent.
However, fringe expenses can be challenging to allocate precisely to individual projects. If you’ve ever tried to manually figure out how much of each employee’s benefits should be charged to a particular bid, you know how confusing it can get.
How Estimating Link Helps
Estimating Link integrates fringe costs directly into your labor calculations. By customizing labor rate tables, you can incorporate benefits, holiday time, and other fringe items as part of the hourly labor cost. This eliminates guesswork and ensures that every labor expense is accurately represented in your bid.
Overhead Costs
What Are Overhead Costs?
Overhead costs are expenses related to running a project that don’t apply to just one client but are still necessary for contract completion. Overhead only applies if your company has active projects; no active contracts means no project overhead.
Examples include:
- Indirect labor (e.g., managerial meetings spanning multiple projects).
- Travel costs for supervisors overseeing various job sites.
- Hiring-related expenses such as HR labor, job ads, and recruitment fees.
Overhead costs typically fall into three categories: fixed, variable, and semi-variable.
- Fixed Overhead Costs stay the same regardless of your company’s activity level (e.g., salaries, government licenses).
- Variable Overhead Costs fluctuate with your company’s workload (e.g., legal fees, equipment maintenance).
- Semi-Variable Overhead Costs have a base rate plus additional charges tied to usage (e.g., utilities or vehicle mileage).
How Estimating Link Helps
In Estimating Link, you can add job-specific overhead costs (like travel or special insurance) in the Job Overhead Table, then see their impact in the Markup Costs Summary. This feature lets you distribute overhead expenses across your entire bid, giving you a crystal-clear picture of how overhead affects your project’s profitability.
General & Administrative (G&A) Costs
What Are G&A Costs?
G&A costs include the broader expenses of running your construction business day-to-day. They don’t link directly to a single contract but are necessary for overall operations.
Examples include:
- Salaries of administrative staff.
- Insurance and utilities for your main office.
- Software subscriptions.
- Marketing, bids, and proposals.
- Accounting services.
G&A costs can be easy to overlook, but they have a big impact on your final profit margin if you don’t allocate them properly.
How Estimating Link Helps
In Estimating Link, you’ll often see G&A referred to as “corporate overhead” within the Markup Summary. You can set your G&A or corporate overhead to spread across the bid, ensuring these indirect expenses are included in your final total. This clarity helps you avoid underestimating and puts you in a stronger position when setting your prices.
Resource:
Our Webinar on the Markup Summary details how to input your G&A (corporate overhead) so your estimate includes all business-level costs accurately.
Why Understanding These Costs Matters
Knowing the difference between fringe, overhead, and G&A—and allocating them correctly—keeps your estimates accurate and your business profitable.
Here’s why it’s crucial:
- Accurate Bids: If you miss fringe or overhead expenses, you risk inaccurate estimates and lose your competitive edge when bidding.
- Healthier Bottom Line: Proper allocation of overhead and G&A prevents unpleasant surprises during the project and helps maintain positive cash flow.
- Competitive Advantage: Contractors who accurately calculate indirect costs can price bids more strategically while still ensuring profitability.
How Estimating Link Simplifies Indirect Cost Allocation
Estimating Link brings all these cost pools—fringe, overhead, and G&A—under one software umbrella. You can input your job-specific overhead costs, incorporate fringe benefits into labor rates, and spread G&A across the entire project.
This unified approach helps you:
- Eliminate Guesswork: With everything in one place, you won’t have to juggle spreadsheets or wonder if you’ve missed a cost.
- Boost Confidence in Your Numbers: Real-time summaries and reports show how each cost category impacts your final bid.
- Stay Organized: By using rate tables and overhead markup functions, you ensure consistency from project to project.
Bottom Line: A Better Way to Estimate
Understanding the differences between fringe costs, overhead, and G&A is critical for any contractor. With Estimating Link, you don’t just learn about these costs—you seamlessly integrate them into every bid.
Taking the time to get these calculations right means fewer budget surprises, more profitable projects, and stronger relationships with your clients. If you’re looking for a smarter, clearer way to handle indirect costs, Estimating Link can make a world of difference.
Ready to Streamline Your Indirect Costs?
If you want a solution that simplifies fringe costs, overhead costs, and G&A costs, Estimating Link is here to help. Visit tcli.com to learn more about our construction estimating software. Let’s make sure every project you bid on is both competitive and profitable, right from the start.
