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Literature Review on Soft Cost Definition and Components 15 Here is a partial listing of soft costs incurred in building construction: Architect and engineer fees, audit and bookkeeping charges, realty taxes/assessments, advertising and promotional expenses, real estate commissions, tenant inducement expense, premiums--Insurance/bonds, license and permit fees, increased mortgage costs, additional loan expenses, legal expenses, cost of vacancy, increased cost of labor, security expenses, and penalties. (as of 10/5/2007) has the following definition for soft costs: Soft Costs are cost items in addition to the direct Construction Cost. Soft Costs generally include archi- tectural and engineering, legal, permits and fees, financing fees, construction interest and operating expenses, leasing and real estate commissions, advertising and promotion, and supervision. Further, this source contends that the terms indirect costs and soft costs are synonymous. 2.2. Indirect Costs Few professional publications have used the term "soft costs," instead discussing many ele- ments of soft costs at some length under indirect costs. However, extending the search to include the term "indirect costs" yielded more information regarding various elements of soft costs. In considering indirect costs it is important to identify the relevant perspective. As an example, a cost item that is considered an indirect cost for a project (general conditions) may be categorized as a direct cost from a contractor's perspective. In the same way, a cost that can be considered a direct cost for a provider of professional services (such as labor cost) could be considered an indirect cost from the owner's or sponsor's perspective. For example, the Association for the Advancement of Cost Engineering (AACE, 2007) offers the following definition for indirect costs: Costs [that] are not directly attributable to the completion of an activity. Indirect costs are typically allocated or spread across all activities on a predetermined basis. In construction, all costs which do not become a final part of the installation, but which are required for the orderly completion of the installation and may include, but are not limited to, field administration, direct supervision, capital tools, startup costs, contractor's fees, insurance, taxes, etc. This definition is from the perspective of the contractor. For the sponsor of a capital project, such as a transit agency dealing with multiple contracts in the same project, the contractor's gen- eral conditions and home office overhead could be considered direct costs because they are clearly attributable to that specific contract. It is therefore conceivable that the whole construction con- tract could be considered a hard cost. Since the purpose of this guide is to help project sponsors estimate project soft costs with greater accuracy, this analysis takes the perspective of the proj- ect sponsor and treats the general conditions and home office overhead as construction costs. 2.3. Textbooks and Technical Books Ten construction management textbooks were also selected for review because they have been commonly used in various universities and other academic settings for years. The term "soft costs" was only used in one of these textbooks (Bartholomew, 2000, p.252) as follows: In development, as distinct from actual construction, direct costs are the hard costs, the total construction costs that include what we call in estimating both direct and indirect construction costs. The indirect, or soft, costs in development include the costs of financing, advertising and sales, fees, insurance, ground rent and taxes during construction, and the costs of land rights.