Hard costs are the tangible "brick and mortar" costs of putting a building in place: site work, foundations, structure, envelope, MEP, finishes, equipment, and the labor and overhead required to install them. They are the direct costs that show up on the contractor's schedule of values. On a typical commercial project, hard costs run 70 to 85% of the total project budget.
Hard costs contrast with soft costs (architect fees, permits, financing, legal, FF&E, marketing). Owners and lenders track both separately because they have different timing, risk profiles, and contingency requirements. The contractor's contract usually covers only hard costs. Soft costs sit on the owner's budget and are typically managed through the owner's representative, not the GC. Understanding the line between the two avoids scope confusion and contingency disputes.