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CHAPTER 2 Literature Review on Soft Cost Definition and Components The objective of this literature review is to find a consistent definition for the term "soft costs" in the context of capital construction projects and to decide what cost items fall under this term. The following general sources of information were reviewed: Technical and scholarly articles published in archival U.S. journals; Articles presented in various U.S. professional conferences and published as part of the proceedings; Internet sources; Books, and specifically, engineering textbooks; U.S. Army Corps of Engineers publications; and European cost estimation sources. 2.1. Papers and Websites Many organizations and industry groups publish definitions of soft costs on the Internet or in readily available literature. It is important to note that the term "soft cost" is not used commonly in the technical literature. However, many of the cost items associated with soft costs are cov- ered under the definition of indirect costs. The Association of Physical Plant Administrators (APPA, 2005) has the following definition: Soft costs include such items as architecture, design, engineering, permits, inspections, consultants, environ- mental studies and regulatory demands needing approval before construction begins. Soft costs do not include construction, telecommunications, furnishings, fixed equipment and expenditures for any other permanent components of the project. . . . . These costs are related to those items in a project that are necessary to prepare and complete the non-construction needs of the project. While the main components are the same, there is a distinction in this terminology that limits the definition of soft costs to costs incurred prior to construction. In the FTA SCC defi- nition, soft costs include professional and managerial services during the construction phase as well. KRG Insurance Group (2002) defines soft costs for building and entrepreneurial projects as follows: "Soft Costs" may be defined as those indirect additional expenses that form part of the construction or repair of property. They not only impact on building cost but on business revenues. . . . In a typical ac- counting summary of construction costs on a new project it is normal for soft costs to comprise up to 30% of total expenses. 14