Indirect Costs
EVM Terms
Reviewed by forProject Technology - updated Sep 2026
Quick definition: Indirect Costs are costs incurred for common or shared business objectives that can't be traced to a single specific contract or project.
Unlike direct costs, which can be charged straight to one contract, indirect costs support the business broadly. Costs like corporate management salaries, office rent, employee benefits, and marketing are instead allocated across multiple contracts through pools such as Overhead and G&A. This allocation is typically done using a rate applied to an appropriate cost base.
Why it matters
Because indirect costs make up a real, often substantial share of total project cost, understanding how they're allocated is essential for accurate pricing and cost performance measurement. Misapplied indirect rates can distort a project's true cost picture even when direct costs are tracked perfectly.
Also known as
N/A
Used in
Elements of Cost breakdown; allocated via Overhead and G&A rates
See also
FAQ
What's a simple example of an indirect cost?
Corporate office rent is a common example — it benefits the whole company, not one specific contract, so it can't be charged directly to a single project.
How are indirect costs charged to a project if they can't be traced directly?
They're allocated using rates (such as Overhead or G&A rates) applied to a defined cost base, spreading the shared cost proportionally across contracts.
Definition maintained by forProject Technology.
© 2026 forProject Technology, Inc.
© 2026 forProject Technology, Inc.
