(b) Direct and indirect costs shall include, but not be limited to:

1. (1) Labor includes the wages and expenses of employees directly engaged in or in direct charge of construction work. It includes expenses directly related to an employee's wages, such as workers' compensation insurance, payroll taxes, benefits and other similar items of expense.
2. (2) Engineering includes the portion of the wages and expenses of engineers, draftsmen, inspectors, and their direct supervision applicable to construction work. It includes expenses directly related to an employee's wages, such as workers' compensation insurance, payroll taxes, benefits and other similar items of expense.
3. (3) Material and supplies includes the purchase price of material used at the point of free delivery plus the costs of inspection, loading and transportation, and an equitable portion of provisioning expense. In determining the cost of material used, proper allowance shall be made for unused material, for material recovered from temporary structures used in performing the work involved, and for discounts allowed and realized in the purchase of material. This item does not include construction material that is stolen or rendered unusable due to vandalism. Such material should be charged to the applicable plant specific operations expense accounts.
4. (4) Transportation includes the cost of transporting employees, material and supplies, tools and other work equipment to and from the physical construction location. It includes amounts paid therefor to other companies or individuals and the cost of using the company's own motor vehicles or other transportation equipment.
5. (5) Contract work includes amounts paid for work performed under contract or other agreement by other companies, firms or individuals; engineering and supervision applicable to such work; cost incident to the award of contracts; and the inspection of such work. The cost of construction work performed by affiliated companies and other details relating thereto shall be available from the work in progress and supporting records.
6. (6) Protection includes the cost of protecting the company's property from fire or other casualties and the cost of preventing damages to others or the property of others.
7. (7) Privileges, Permits, and Rights of way includes such costs incurred in obtaining these privileges, permits, or rights of way in connection with construction work, such as for use of private property, streets or highways. The cost of such privileges and permits shall be included in the cost of the work for which the privileges or permits are obtained, except for costs includable in account 2111, Land, and account 2690, Intangibles.
8. (8) Taxes includes taxes properly includable in construction costs before the facilities are completed for service, which taxes are assessed separately from taxes on operating property or under conditions that permit separate identification of the amount chargeable to construction.
9. (9) Special machine service includes the cost of labor expended, materials and supplies consumed and other expenses incurred in the maintenance, operation and use of special and other labor saving machines (other than transportation equipment) such as trenching equipment, cable plows and pole setting trucks. Also included are expenditures for rental, maintenance and operation of such machines owned by others. When a construction job requires the purchase of special machines, the cost thereof, less the appraised or salvage value at the time of release from the job, shall be included in the cost of construction.

10. (10) Allowance for funds used during construction includes the cost of debt and equity funds used in the construction of telecommunications property and shall be applied to telecommunications property in accounts 2003 and 2004 unless otherwise directed by the commission. Allowance for funds used during construction shall be charged to the accounts appropriate for the cost of the property acquired or constructed as follows:

    1. (i) Reasonable amounts of interest during the construction period (before the property is received or is completed ready for telecommunications service) on general funds expended for any acquisition or construction of telecommunications plant shall be computed on amounts in accounts 2003, Telecommunications Plant Under Construction—Short Term and 2004, Telecommunications Plant Under Construction—Long Term and shall be charged thereto. Such amounts shall be credited to account 7340, Allowance For Funds Used During Construction.
    2. (ii) When funds, derived from the sales of bonds, notes and other interest-bearing debt, are specifically acquired and separately held for use in the construction of telecommunications plant, the total interest, discount or premium, and expense on such debt, less interest earned on such funds, applicable to the accounting period shall be included in the cost of telecommunications plant and credited to account 7340, Allowance For Funds Used During Construction; provided, however, that no interest charge for a period longer than six months prior to the commencement of construction work shall be made unless specifically authorized by the commission.
    3. (iii) During the period of suspension of a construction project, no allowance for funds used during construction for a period longer than six months from the date of its suspension shall be included in these accounts unless specifically authorized by the commission. No allowance for funds used during construction charge shall be included in these accounts on expenditures for construction projects which have been abandoned.
11. (11) Insurance includes premiums paid specifically for protection against loss and damage in connection with the construction of telecommunications plant due to fire or other casualty, injury to or death of employees or others, damages to property of others, defalcations of employees and agents and the nonperformance of contractual obligations of others.
12. (12) Construction services include the cost of telephone, electricity, power, construction quarters, office space and equipment directly related to the construction project.
13. (13) Indirect construction costs shall include indirect costs such as general engineering, supervision and support. Such costs, in addition to direct supervision, shall include indirect plant operations and engineering supervision up to, but not including, supervision by executive officers whose pay and expenses are chargeable to account 6711, Executive. The records supporting the entries for indirect construction costs shall be kept so as to show the nature of the expenditures, the individual jobs and accounts charged, and the bases of the distribution. The amounts charged to each plant account for indirect costs shall be readily determinable. The instructions contained herein shall not be interpreted as permitting the addition to plant of amounts to cover indirect costs based on arbitrary allocations.
14. (14) The cost of construction shall not include any amounts classifiable as Corporate Operations Expense.