How to Calculate Labor Budget (Step by Step) | ARE 5.0 PcM

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In this episode, we dive into a classic ARE 5.0 Practice Management (PcM) practice question on top-down budgeting. Using a real-world style scenario, we break down step by step how to calculate a project’s labor budget from construction costs, gross fee, consultant fees, and contingency.

You’ll learn:

• How to calculate gross fee as a percentage of construction cost
• Why consultant fees are taken from the gross fee (not the construction cost)
• How contingency and direct expenses factor into the calculation
• How to arrive at the final labor budget available for staffing and project phases
• Where to find the formula in the Architect’s Handbook of Professional Practice (AHPP Table 10.4)

This breakdown is critical for the ARE 5.0 PcM exam, but it’s also directly applicable in real-world firm management when setting fees and allocating resources.

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