What term describes costs incurred by contractors that do not directly relate to project production?

The term that describes costs incurred by contractors that do not directly relate to project production is project overhead. This encompasses expenses necessary for the overall operation of a construction project but are not tied to a specific task or project activity. Examples can include general administrative costs, insurance, utilities, and costs associated with project management.

These costs can be vital for maintaining business operations but do not contribute directly to the physical construction of the project itself. Contrarily, operational expenses typically refer to ongoing costs needed to run a business but do not specifically highlight the construction aspect. Fixed costs are expenses that remain constant regardless of the level of project activity, while variable costs change with the level of production. Understanding the distinction helps in accurately navigating budgeting and financial planning in construction projects.