A contractor in WA would consider the following to be an indirect expense in the construction of an improvement:

• A. Labor cost
• B. Material cost
• C. Building permit
• D. Subcontract

Answer: (C)

In construction cost estimating, costs are grouped as direct (hard) costs and indirect (overhead) costs. Direct costs are those that can be tied to specific parts of the work—labor costs for the crews, material costs for the items used, and payments to subcontractors for particular trades. The building permit, however, isn’t a charge for a specific piece of work. It’s a regulatory expense required to legally start and complete the project and it applies to the project as a whole, not to a particular scope of work. Because it supports the entire construction effort rather than a single component, it’s treated as an indirect (overhead) cost. So the building permit is the best example of an indirect expense. The other items are direct costs since they are directly linked to identifiable portions of the construction.