Understanding Soft Costs in Construction: A Complete Guide

Soft costs in construction refer to the non-tangible expenses that are crucial for project completion but do not involve physical construction. These costs typically range from 15% to 30% of the total project budget and include fees for design, permits, and project management. They are essential for contractors, project managers, and small businesses to consider when planning and executing construction projects. To purchase software that manages these costs effectively, consider requesting a demo, evaluating pilot programs, and reviewing contract terms.

Soft Costs in Construction: Pricing Models and Typical Costs

Understanding the pricing models for managing soft costs is essential for accurate budgeting. Typical pricing models include:

• Per user/month: Ideal for small teams, with costs ranging from $20 to $100 per user.
• Per project/month: Suitable for larger projects, typically $500 to $2,000 per project.
• Annual contracts: Often include discounts, ranging from $5,000 to $20,000 annually.
• Implementation fees: One-time costs for setup, usually $1,000 to $5,000.
• Training costs: Vary based on team size, from $500 to $3,000.

Line items to expect on a quote include software licenses, support fees, and integration costs.

Soft Costs in Construction: Features that Actually Change Job Outcomes

Key features of software managing soft costs can significantly impact project outcomes:

• Gantt and CPM tools: Improve scheduling and resource allocation.
• Submittals and RFIs: Enhance communication and reduce delays.
• Punch list management: Streamlines project closeout.
• Version control and document management: Ensures accuracy and compliance.

For estimators, these features improve accuracy; for project managers, they enhance control; and for operations, they ensure compliance and efficiency.

Soft Costs in Construction: Hidden Costs and Procurement Pitfalls

Be aware of hidden costs and procurement pitfalls, such as:

• Implementation and training fees
• Integration and migration costs
• Overage charges and support tiers
• Long-term contract commitments

Procurement red flags include unclear pricing structures and lack of support transparency.

Soft Costs in Construction: Evaluation Checklist (RFP-ready)

Use this checklist to evaluate software solutions:

• Does it support Gantt and CPM scheduling?
• Are submittals and RFIs integrated?
• Is there a robust document control system?
• What are the training and support options?
• How does it handle version control?
• Are there integration capabilities with QuickBooks and Sage?
• What security measures are in place?
• Is there a clear pricing model?
• What are the contract terms?
• Is there a demo or trial available?
• How is data migration handled?
• What is the feedback loop for improvements?

Soft Costs in Construction: Integrations, Security, and Permissions

Key considerations for integrations and security include:

• Single Sign-On (SSO) capabilities
• SOC 2 compliance
• Role-based permissions and audit trails
• Data retention policies
• Common integrations with Microsoft 365, Google Drive, and Dropbox

Minimum security controls should include encryption, regular audits, and access logs.

Soft Costs in Construction: Who It’s Best For (by Company Type)

Soft cost management software is best suited for:

• Small contractors: Need cost-effective solutions with basic features.
• General contractors: Require comprehensive tools for large projects.
• Specialty contractors: Benefit from niche-specific features.
• Multi-region operations: Need robust integration and compliance tools.

Best fit for companies seeking to streamline operations and improve cost management; not fit for those with minimal project management needs.

Soft Costs in Construction: FAQ

• What are soft costs in construction? Soft costs are non-tangible expenses like design and permits essential for project completion.
• How do soft costs differ from hard costs? Hard costs are physical construction expenses, while soft costs cover planning and management.
• Why are soft costs important? They ensure project compliance, efficiency, and successful completion.
• Can soft costs be reduced? Yes, through efficient project management and software solutions.
• What is a typical percentage for soft costs? They usually range from 15% to 30% of the total project budget.
• How do I choose the right software? Evaluate features, pricing, and integration capabilities to match your needs.

Implementation Timeline (30/60/90 Days)

Implementing software to manage soft costs requires a structured timeline:

• Week 1–2: Discovery phase, define roles, and establish permissions model.
• Week 3–4: Data migration scope and sign-off.
• Month 2: Pilot selection and go-live checklist.
• Month 3: Stabilization and governance.

Ensure all stakeholders are aligned and that baseline metrics are established for success.

Change Management and Adoption Plan

Successful adoption of new software requires a comprehensive change management plan:

• Identify stakeholders and champions.
• Develop role-specific training programs.
• Establish a communication cadence.
• Create a feedback loop to address concerns.
• Prevent "shadow spreadsheets" by ensuring all data is centralized.

An adoption controls checklist can help maintain consistency and engagement.

Data Model Tips (Cost Codes, Spec Sections, Drawing Sets, Versions)

Effective data modeling is crucial for managing soft costs:

• Use a three-level cost code hierarchy for granularity.
• Implement version control conventions.
• Handle alternates and allowances with clear documentation.
• Ensure unit pricing is consistent across projects.

For example, a three-level cost code hierarchy might include division, section, and item levels.

KPI/ROI Framework

Establishing a KPI/ROI framework helps measure the success of soft cost management:

• Define baseline week and measurement windows.
• Differentiate between leading and lagging indicators.
• Track KPIs such as cost variance, schedule adherence, and change order frequency.
• Calculate ROI by comparing cost savings to software investment.

Example KPIs include cost per square foot, project duration, and client satisfaction scores.

Integration/Migration Scenarios

Consider common integration and migration scenarios:

• Integrate with QuickBooks/Sage for financial management.
• Use Microsoft 365 or Google Drive for document storage.
• Ensure identity/SSO and permissions parity.
• Maintain retention and audit trail continuity.
• Develop cutover strategies to minimize disruption.

Successful integration requires careful planning and execution to ensure seamless transitions.