Describe the Four Types of Costs on a Project

by Lisa McQuerrey

Estimating the cost of a project varies based on the industry, the type and scope of the project undertaken and the time frame for completing the project. While the variables of any given project may change according to circumstances, there are four main elements of project costing found in most all project cost estimations.


Costs related to pre-project planning and preparation vary widely from industry to industry. Typical pre-planning costs include selecting potential project managers and employees, hiring consultants, conducting market and project research and setting up vendor bidding opportunities. Another cost element of pre-project planning is in establishing a budget and timeline for the project, obtaining necessary permits and licenses, and securing materials, workspace and equipment.

Material Costs

All materials necessary for a project are included in material costs. Materials are anything the project manager purchases to aid in or conduct the project. For example, if a project is constructing a building, materials would include concrete foundation, lumber, drywall, electrical components, plumbing, fixtures, roofing materials and paint. A project of developing a corporate training manual would include the cost of paper, printing, lamination and binders.

Human Resources

All individuals employed during the course of a project are costs associated with human resources. Human resources include everyone from the project manager to the janitor. In addition to the salary cost of human resources is the cost of benefits and insurance, where applicable. Even if a person is not working on a project full-time, all of his contribution to a project is considered a human resources project cost.

Operating Costs

The operating costs of a project include the fees associated with purchasing project supplies, paying rent and associated costs on a facility or location for the project to take place, the cost of permitting, inspections and daily operations. Operations include the cost of renting and running machinery and picking up or delivering supplies or products. For example, operating costs on constructing a building would include cement mixer delivery of concrete for a foundation pour, the cost of gasoline for an on-site excavator and the rental of a hydraulic lift to deliver roof shingles. Operating costs on a corporate training manual project would include costs associated with running a computer or printer.

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