What are non-recoverable costs?

Non-recoverable costs refer to expenses that a service provider incurs during a project or operation which are not reimbursed by the client. This means that regardless of the work done or the resources expended, these costs remain the responsibility of the provider and cannot be reclaimed or charged back to the client.

In practice, non-recoverable costs can include various overheads, administrative expenses, or specific expenditures related to project delivery that were not anticipated to be reimbursed as part of the contractual agreement. This concept is important in project management and financial forecasting because it affects the overall profitability of a service provider.

Costs agreed to be reimbursed by the client represent a different category where the provider can expect to recover those expenses through direct billing to the client. Insurance-related costs typically fall under claims that can be sought but do not fit the criteria of non-recoverable costs since they are contingent on the policy. Lastly, direct labor expenses can sometimes be recoverable depending on the terms of the agreement between the client and provider, hence they do not inherently classify as non-recoverable.