Contract documents

August 16, 2023

“General conditions costs” is a frequently used term in the construction industry, but the exact meaning, and related scope of coverage, can vary based on a variety of factors. In construction, this term generally refers to indirect costs that are incurred during performance of work, such as expenses associated with the management, administration, and coordination of the project. Typically, contractors include general conditions costs in their estimates to cover their operational expenses and project-related services when bidding or negotiating agreements.

General conditions costs can widely vary depending on the project size, complexity, location, scope of work, and other factors. Article 7 of A102™-2017, Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price identifies a variety of general conditions costs. Here are some common items that are typically included in a general contractor’s general conditions costs:

1. Administration: Administrative expenses generally include the wages, salaries, and benefits of superintendents, project managers, and administrative staff responsible for overseeing, coordinating, and managing the day-to-day issues on the project.
2. Temporary Facilities: This includes the cost of installation, maintaining, and removing temporary facilities on the site, such as job trailers, site offices, restrooms, and storage. It can also include rental charges for these items.
3. Cleanup and Waste Removal: Costs for removing debris from the site and disposing of construction waste properly.
4. Permits, Inspections, and Tests: Costs associated with obtaining necessary permits and paying for inspections and tests required by authorities having jurisdiction over the project.
5. Safety and Security: Expenses for implementing safety protocols, security, and equipment to ensure a safe working environment for personnel and equipment on the site.
6. Mobilization and Demobilization: The cost of moving and storing equipment, materials, hand tools, and supplies to and from the site.
7. Weather Protection: Expenses for providing weather protection measures for the site and the work performed.
8. General Liability Insurance: Insurance and bond premiums to cover the requirements under the agreement.

Using data from previous projects, contractors may establish a standard set of general conditions costs as a baseline for their projects. This baseline forms the foundation of a new project’s estimate or bid. General conditions costs are typically calculated as a percentage of the total project cost or included as a lump sum in the project bid.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.