Site overheads and company overheads: what goes in, how to calculate them from the schedule, and what they do to the price
Site overheads (preliminaries) are all the costs of running the site that have no item in the bill of quantities (BOQ): a works manager, supervision, containers, fencing, security, insurance, a crane and temporary electricity. Company overheads are the costs of the office behind the project. Both go into the price, and both depend mainly on time: every extra month on site adds another month of overheads. I have experience in calculating overheads and in pricing projects, from my final project in construction management to a contractor's tender department.
What goes into site overheads
The list below is based on the list of overheads I prepared in my final project, and on what I saw later in tenders. Each item also shows how it is calculated, because almost all of them are a monthly price times a number of months.
| Item | How to calculate |
|---|---|
| Works manager and site engineer | Monthly salary times construction months |
| Supervision, when it is the contractor's responsibility | Per month |
| Skips for waste removal | Number of skips a month times months |
| Office and storage containers | Monthly rent times months |
| Temporary electricity, water and telephone | Per month |
| Site fencing | Linear metres, sometimes in stages |
| Security | Guards times months |
| Scaffolding, when it is not in the BOQ items | m² of facade: height times length |
| Crane, telescopic handler and other plant | Working days or months |
| Temporary roads and compacted tracks for lorries | m² or lump sum |
| Land surveyors | Visits or lump sum |
| Insurance | A percentage of the value of the work, or an amount for the period |
| Vehicle and petty cash | Per month |
| Safety: guardrails, signage, training | Lump sum and per month |
In some tenders, some of these items appear in the preliminaries chapter of the bill of quantities, and in others they are built into the unit rates. It is important to know which, otherwise the same cost is counted twice or not counted at all.
Company overheads: what stands behind the project
Company overheads are not tied to a particular site: secretarial staff, bookkeeping, office and equipment, general insurance, a pricing and tender department, financing costs and fees for bank guarantees. On top of them a reserve for the unforeseen is sometimes added, a contingency allowance that on site is called baltzam. They are spread over all the company's projects, and so they appear in the price as a percentage.
An example of the split: a company that carries out four projects of similar size a year, with office expenses of one million shekels a year, loads each project with about a quarter of that amount. If one of the projects is twice the size of the others, the split is by volume and not by the number of projects. In my final project I calculated the company overheads from components: secretarial staff, bookkeeping, office and equipment, maintenance and insurance, and on top of them a reserve of 5% of the project cost for the unforeseen. What matters is not the exact percentage but that every component is written down, so that on the next project you can update it instead of guessing again.
An example: how site overheads depend on the schedule
As an illustration, monthly site overheads of 60,000 shekels on an 18-month project: 1,080,000 shekels. If construction runs two months longer, another 120,000 is added without any item in the BOQ changing. So shortening the schedule is one of the direct ways to reduce cost, as explained on the page construction schedule.
In my final project, four two-family houses, the site overheads came to about 14.5% of the construction cost, and the company overheads to about 10.3%. These are the numbers of one project and one year; they are not a norm, but they give an order of magnitude of how significant this is.
Multiply or divide: how to add overheads and profit
This is where a common mistake happens. A profit of 10% of the price means dividing by 0.9, not multiplying by 1.1. Multiplying by 1.1 gives a profit of about 9.1% of the price, not 10%. The table shows a full chain on a direct cost of 100:
| Step | Calculation | Result |
|---|---|---|
| Direct cost | Material, labour and equipment | 100 |
| Site overheads 14.5% | 100 times 1.145 | 114.5 |
| Company overheads 10.3% | 114.5 times 1.103 | 126.3 |
| Profit 10% of the price | 126.3 divided by 0.9 | 140.3 |
| For comparison: multiplying by 1.1 | 126.3 times 1.1 | 138.9 |
The difference between 140.3 and 138.9 looks small, but on a project worth tens of millions it is a real amount. How the direct cost breaks down into hours and materials is on the page construction inputs.
Overheads are time. Whoever prices overheads as a fixed percentage without checking the schedule is guessing. Whoever calculates overheads per month times months knows exactly what a delay costs.
Site overheads do not appear in the drawings, so they easily drop out of a quantity takeoff. A quantity surveyor who knows the project duration can estimate them, and the quantity takeoff gets an explicit line instead of a sweeping percentage.
Frequently asked questions
Do site overheads appear in the bill of quantities?
Usually not as a separate item; they are built into the unit rates. Some tenders have a preliminaries chapter, and there part of them is measured separately.
What percentage are overheads?
There is no single number. It depends on the project's duration, size and location, and on the safety requirements. Safety as part of the overheads is covered on the page site safety officer and works manager.
What is baltzam?
The Hebrew abbreviation for "unforeseen in advance": a reserve for costs that cannot be foreseen, in English a contingency allowance. It is separate from the profit.
How does this connect to the cost estimate?
A cost estimate without overheads is half an estimate. A quantity surveyor for construction projects adds them explicitly, as explained on the page construction cost estimate.
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Contact me for a quote* Created with AI for marketing, for illustration only. Not reviewed by Yaakov Avital and not professional advice. Every project must be checked on its own by a professional quantity surveyor and an engineer.