The number a contractor bids isn't the number an owner pays. The contractor's price covers the building. The owner also pays for the design team, permits and municipal charges, furniture, technology, financing, moving in and its own management time, plus the contingency and escalation that sit on top of all of it. Together, those items can add a large share on top of the construction contract. When a budget is built from the construction estimate alone, the project is short before the first shovel goes in.
This guide sets out the difference between construction cost and total project cost, walks through the soft costs owners most often forget, and explains how to build a budget that holds up from approval to opening.
Construction cost and total project cost
Construction cost is what it costs to build: the trades, materials, equipment, the general contractor's site overheads and fee. It's what a quantity surveyor's construction estimate prices and what the tender buys.
Total project cost is everything the owner spends to get from idea to an occupied, working building. Alberta Infrastructure's Project Cost Framework (2026) is a useful public checklist. Beyond construction, it lists these non-construction categories:
- design and professional or technical consultant services
- planning and programming
- project management and administration
- permits, fees and approvals
- testing and commissioning
- furniture, fixtures and equipment (FF&E)
- information technology
- move-in, transition and operational readiness
- other owner and non-construction costs
The same framework requires contingency and escalation to be shown as separate lines within total project cost, with their basis stated. Private owners will usually add land, financing and carrying costs, and any leasing or tenant costs that fall on the project.
British Columbia's transportation ministry puts the principle simply: its estimating guidelines require estimates to be "all inclusive." A budget that leaves categories out isn't conservative or aggressive. It's incomplete.
View the data
| Component | Amount |
|---|---|
| Construction contract | $20.0M |
| Design and consultants | +$2.2M |
| Permits and municipal charges | +$0.6M |
| FF&E | +$1.4M |
| IT, AV and security | +$0.9M |
| Project management and owner | +$0.8M |
| Financing and carrying | +$0.9M |
| Moves and readiness | +$0.3M |
| Contingency and escalation | +$2.1M |
| Total project cost | $29.2M |
| Soft costs as % of construction | 46% |
The soft costs owners forget
Design and specialist consultants
Most owners budget for the architect and the main engineers. Fewer budget for everyone else: geotechnical and environmental investigations, surveys, code and fire consultants, cost consultants, commissioning agents, envelope and acoustic specialists, and the inspections and testing needed during construction. Fees also grow when the design changes, the schedule extends or contract administration runs longer than planned.
Permits and municipal charges
Permit fees are usually modest but not trivial. In Toronto, the building permit fee is a service index multiplied by floor area. For 2026, the rate for finished office space is $24.46 per square metre and for finished retail space $20.77. A 1,000 square metre finished office therefore attracts a permit fee of about $24,460, and a zoning certificate adds a further 25% of the permit fee.
The larger items are the municipal charges that come with the permit. Toronto collects development charges, education development charges, parkland dedication and other planning-related charges, and the City's permit page states that no permit is issued until all applicable fees and charges are paid. On new floor area, these charges can far exceed the permit fee itself. Toronto is also in the middle of a comprehensive development charges review expected to run into 2027, so rates in an early budget may not be the rates at permit. Check the current by-law and rate schedule for the specific project, and carry an allowance until they're confirmed. Our guide to the Toronto building permit timeline covers the approvals side.
Furniture, fixtures and equipment
FF&E is often managed by a different team from construction, on a different budget, with its own procurement. That's how it gets missed. Furniture, shelving, kitchen equipment, signage, window coverings and specialist equipment can have long lead times, and they need to be coordinated with the base building for power, data, blocking and structural support.
Technology, audio-visual and security
Network equipment, Wi-Fi, audio-visual systems, access control, cameras and point-of-sale hardware often sit in an operating budget by default. If they're needed on opening day, they're a project cost. They also drive base-building requirements such as conduit, rack rooms and power, which are far cheaper to design in than to add later.
Project management and owner costs
Project management, owner's representation, legal review of contracts, insurance, the owner's own staff time and security for an empty site all cost money. So do builder's risk insurance and bonding where the owner pays for them directly.
Financing and carrying costs
For developers and many private owners, interest during construction, lender fees, property taxes and lost rent on vacated space are real project costs. They're also time-related: every month of delay adds to them, even if the contractor's price doesn't change.
Testing and commissioning
Commissioning is listed as its own category in Alberta's framework for good reason. The contractor's price usually covers start-up and the testing its specifications require. It rarely covers an independent commissioning agent, extended seasonal testing, enhanced building envelope testing or the owner's own operations staff attending sessions. If the building has a sustainability certification target, the documentation and verification fees belong here too.
Planning, programming and early studies
Before design starts, owners spend money on feasibility studies, functional programs, site investigations, market studies and planning applications. On a development site, rezoning or site plan approval can involve months of consultant work and application fees. These costs are often spent before the project has a budget at all, which is why they're so often missing from the final account.
Move-in and operational readiness
Moving, decommissioning old space, staff training, opening inventory, temporary facilities and the period of running two sites in parallel are rarely in anyone's budget until someone asks who's paying.
Why the gap hurts
On programs we've supported, the soft-cost overrun is often bigger than the construction overrun, for three reasons.
- Contingency is calculated on construction only. A 10% contingency on the construction contract offers no cover for an FF&E budget that was never set.
- Soft costs aren't fixed by tender. The construction contract locks in most of the building price. Fees, charges and owner costs stay open much longer.
- Delay inflates soft costs first. Consultant time, financing, owner staff and carrying costs all run by the month.
There's also a reporting problem. Construction cost reports are usually detailed and monthly because the contractor's payment applications force them to be. Soft costs are spread across invoices, purchase orders and departmental budgets, so nobody sees the total until the project closes. By then, the overrun can't be managed, only explained.
View the data
| Soft cost | When it's committed | Why it's missed | What to do |
|---|---|---|---|
| Permits and charges | Before the permit is issued | Rates not checked for the actual site | Confirm current by-law and rates early |
| FF&E | Design development to opening | Separate team and budget; long lead | One budget, one schedule, one owner |
| IT, AV and security | Late design and fit-out | Left in operating budget by default | Design rooms, power and conduit early |
| Financing and carry | Every month of construction | Grows with delay; not in the contract | Include in every delay assessment |
| Moves and readiness | Final months before opening | No one owns it until it's due | Allowance from day one; named owner |
Leased space has its own traps
For retail and office tenants, the split between landlord and tenant work changes which costs land on the project. A tenant improvement allowance can look like it covers the fit-out until the lease's definition of eligible costs is read closely. Base-building upgrades the landlord requires, landlord review and supervision fees, after-hours work rules, and the cost of meeting the landlord's design standards can all fall on the tenant. Each needs a line in the budget before the lease is signed, not after.
The same applies to rent. If rent starts on a fixed date regardless of when the space opens, every week of construction delay carries a direct cost the contractor's schedule won't show.
Building a total project cost budget
A total project cost budget should use one structure from the first estimate to the final account. Start with a cost breakdown that has a line for every category above, even when the early number is only an allowance. A line with a placeholder is visible. A missing line is invisible until it's spent.
Give each line an owner, a basis and a date. "FF&E: allowance of $X based on comparable fit-outs, to be replaced by a priced list at design development" tells a board much more than a single number. Show contingency and escalation separately, and apply them to soft costs as well as to construction. Our guide to calculating an escalation allowance explains how.
Finally, forecast the whole budget monthly, not just the construction contract. Our guide to construction cost forecasting covers the method, which applies equally to soft-cost lines.
What owners should do
- Approve total project cost, not construction cost. Boards should see every category, with construction as one line among several.
- Use a standard soft-cost checklist for every project, and carry an allowance for anything not yet priced.
- Confirm municipal charges early. Get the current permit fee schedule and development charge rates for the specific site, and track changes until the permit is issued.
- Bring FF&E, IT and security into the project budget and schedule, with a named owner for each.
- Apply contingency and escalation to soft costs too, and include time-related costs in every delay assessment.
The bottom line
Construction cost is what it costs to build. Total project cost is what it costs to open. The difference is predictable, and most of it can be estimated on day one if someone asks the right questions. Owners who budget the whole project, and track soft costs as closely as the construction contract, avoid having to go back to the board for money that was always going to be needed.
Want an independent check of your total project cost budget? Book a 30-minute call with Benjamin R. Consulting.
Sources: Alberta Infrastructure, Project Cost Framework for Alberta Infrastructure Projects (2026), Sections 4.1.2 to 4.1.4; City of Toronto, Building permit fees (2026); City of Toronto, Development charges; BC Ministry of Transportation and Infrastructure, Project Cost Estimating Guidelines (2020). The budget example is illustrative; proportions vary widely by project type. This article is general information, not financial or legal advice.