Cost per Square Foot Explained: What the Number Counts and What It Leaves Out

Cost per square foot is a total project cost divided by an area, and the number means little until you know what the cost includes and which floor area was counted, so ask each bidder to state both before comparing quotes. The Census definitions describe national construction statistics and are not a rule for a remodel quote, and this guide states no price per square foot.

What counts as the cost?

The U.S. Census Bureau says that for an individual project the value of construction put in place includes the cost of materials installed or erected, the cost of labor and a proportionate share of the cost of construction equipment rental, and the contractor’s profit. It also lists the cost of architectural and engineering work, miscellaneous overhead and office costs chargeable to the project on the owner’s books, and interest and taxes paid during construction. It lists land acquisition among the items that construction does not include.

What counts as the square feet?

The Census Bureau defines single-family floor area for its statistics as all completely finished floor space, including space in basements and attics with finished walls, floors, and ceilings. It says this does not include a garage, carport, porch, unfinished attic or utility room, or any unfinished area of the basement, and that in concept measurement is based on exterior dimensions, taken to the outside of exterior walls for detached houses.

What about money set aside for surprises?

HUD says a contingency reserve refers to funds that are set aside to cover unforeseen project costs. A per-square-foot number may or may not include that reserve, so ask each bidder whether one is included and how it is spent.

How can two per-square-foot numbers differ?

One bidder counts a garage and a porch

The Census definition leaves a garage and a porch out of floor area, so a bid that divides by a larger area looks cheaper per square foot for the same work, and the owner asks each bidder which spaces are in the number.

One bidder leaves out design work

The Census list includes architectural and engineering work in the cost, so a number that leaves it out is not the same measure, and the owner asks each bidder whether design work is in the price or billed apart.

One bidder shows no reserve

HUD describes a contingency reserve as funds set aside for unforeseen costs, so a bid with none may show a lower number that grows later, and the owner asks each bidder what covers a surprise behind a wall.

Which questions make two rates comparable?

1. Ask what the number includes, such as labor, materials, profit, design work and overhead.
2. Ask which floor area the number divides by and whether garages, porches and unfinished space are in it.
3. Ask whether a reserve for unforeseen costs is included and how much is left to the owner.
4. Ask each bidder to show the whole quote beside the per-area figure.
5. Ask for the same written scope from every bidder so the numbers compare.

Compare Totals and Scopes Before You Compare Rates

Ask each bidder to put the total, the scope and the area counted on one page, so the per-square-foot figure is a check on the quote and not the quote itself.