If the direct or permanent construction works’ bill of quantities or work schedule is prepared using the design and specification, then general project ‘overheads’ such as time related elements (e.g. project management and general supervision), plus individual items such as approvals and testing, are included and measured as preliminaries or ‘prelims’.
The prelims pricing document itself is likely to be broken down into three sections:
- Section One: costs involved in site establishment that could include land take, access permits, the erection, and installation of site accommodation including welfare facilities. These are generally priced as per Item.
- Section Two: running costs such as power, heat and lighting, plus rent or on-going hire of offices. These are likely to be priced as per week.
- Section Three: any items required for handover and shutdown of the contract such as health and safety files, handover requirements, demobilisation of the site offices, and returning and land take to its previous state.
The preliminaries may also list items the main contractor is to provide on behalf of the Employer such as client’s offices, site vehicles, PPE etc.
When drafting prelim’s descriptions or headings in a pricing document, they should reflect the contract requirements plus any particular method or phasing of the construction works. It’s good practice to include a statement in the prelims pricing document to the effect of, “The Contractor is also advised to examine the general and detailed drawings carefully in order to ascertain the character of the Works and the manner in which they are to be carried out”.
To assist with definitions the RICS NRM2 states that:
“Main contract preliminaries – are items that cannot be allocated to a specific element, sub-element or component. Main contract preliminaries include the main contractor’s costs associated with management and staff, site establishment, temporary services, security, safety and environmental protection, control and protection, common user mechanical plant, common user temporary works, the maintenance of site records, completion and post-completion requirements, cleaning, fees and charges, sites services and insurances, bonds, guarantees and warranties. Main contractors’ preliminaries exclude costs associated with subcontractors’ or work package contractors’ preliminaries.”
Put this simply, the Code of Estimating Practice, published by the Chartered Institute of Building (CIOB), describes preliminaries as:
“…The cost of administering a project and providing general plant, site staff, facilities, and site-based services and other items not included in the rates.”
It’s important for a prelims price build-up to distinguish between the costs that a Principal Contractor will incur under their CDM duties, the level of supervision the main contractor will need to provide, and the management of the works by subcontractors. This is important because it ensures that items are not priced for twice and removes ambiguity so that each party is clear on what is expected.
When preparing a pricing document, you should avoid any attempts to quantity the contractor’s prelims as it is for the contractor to determine the level of staffing they require, how long they believe the project will take, and the general profile of resourcing. For example, if the developer states the quantity of a duration that proves to be insufficient, they could be liable for increases in the same way as a measured item quantity. However, a list of headings against which the contractor can prepare their prelims price is industry standard.
What qualifies as a Preliminary Cost?
The RICS describes those items that would qualify as a preliminary item as being:
“For the most part, preliminaries are the cost of administering a project and providing plant, site staff, facilities site-based services, and other items not included in the rates for measured works.”
The Standard Method of Measurement for building works describes preliminaries sections as those containing items that are not specific to work sections but have an identifiable cost.
Costs that cannot be assigned to a section of works are generally included in the prelims sum. For example, likely inclusions are:
- A general allowance for risk
- The cost for carrying out design works including any temporary works design
- Works to be carried out by statutory undertakers
- Provisional sums
- Site security
- Utility supplies
- Fees and general charges
- Obvious costs for accommodation and staffing
Notwithstanding the above, and if the contract states they are required, any bonds, parent company guarantees, and collateral warranties can be included in the schedule of preliminaries for the contractor to price.
When listing headings against which the contractor can price, it’s good practice to state in the invitation to tender that the contractor must provide a breakdown to the amount inserted in their quotation as this will likely aid tender assessments.
It is common however for tenderers to simply state a percentage against the overall prelims breakdown, which can be frustrating when assessing returns albeit there are recommendations to this approach in some corners. According to ‘Elemental Standard Form of Cost Analysis, Principles, Instructions, Elements and Definitions, 4th (NRM) Edition’ written by RICS in 2012 and published by BCIS, “the cost of preliminaries for the building being analysed should be stated and expressed as a percentage of the contract sum excluding preliminaries, contingencies and, where appropriate, contractor’s design fees.” However, if you are in a position where you have identified a preferred bidder, scrutiny can be applied at this stage to obtain a more appropriate breakdown. Getting this breakdown is important in terms of measuring and assessing valuations.
Principal Contractor Requirement
As a developer there is a legal duty under the Health & Safety at Work Act, the Workplace (Health, Safety and Welfare) Regulations 1992, and the Construction Design & Management (CDM) Regulations 2015 to ensure that appropriate and adequate welfare facilities are provided such as washing facilities, drinking water, changing rooms, facilities for rest, and sanitary conveniences.
If you as developer intend to operate on a management contractor basis and operate as the Principal Contractor then, as far as reasonably practical, you are required to provide welfare facilities as set out in Schedule 2 of the CDM Regulations for your own employees plus anyone else working under your control i.e. other works contractors and where applicable subcontractors on or before any construction activities take place.
It is the duty of the Principal Contractor to engage with the other works contractors to ensure that appropriate welfare facilities are provided.
Welfare facilities are likely to be covered in the prelims pricing schedule by the Main Contractor under the NRM2 Appendix C, Template for Preliminaries, Section 1.2.2 Site Establishment.
If the intention is to operate and delegate as a management contractor, the Principal Contractor role this will need to be reflected in the project scope in order that the main contractor can be held responsible for providing the facilities.
Prelim templates are available from various sources and can be amended to suit individual projects. For example, NRM2 provides Templates for preliminaries pricing schedules in Appendices B and C of their guidance document. Appendix B: Template for preliminaries (main contract) pricing schedule and Appendix C: Template for preliminaries (main contract) pricing schedule.
There are other templates available, such as the Standard Highways Method of Measurement, Series 100 ‘Preliminaries’, which also has a guidance document in support of the measurement criteria and a library of item descriptions document.
Notwithstanding these template forms, there is The Common Arrangement of Work Sections (CAWS) that was developed by the Construction Project Information Committee (CPIC) and is an established arrangement for specifications and bills of quantity, with Category A being Preliminaries.
If you are intent on drawing up your own prelims list, think about following the same sort of pre-defined checklist before making it project specific by adding any programme or access constraints for example. Set out the document in a logical fashion and tie in specification particulars where appropriate to avoid ambiguity as the project develops.
Health & Safety and Shared Facilities
Whilst the legal definition of a developer and a Principal Contractor is clear, there are other considerations when preparing the scope in terms of prelims such as access, protection of the works, banksmen, and gatemen. Whilst the works could be phased during construction with different works contractor in each section, does it make sense for each one to provide their own access scaffold for example or would it be better for the management contractor to cover the item?
What types of prelims can I expect subcontractors to take on?
NRM2 defines ‘subcontractor’s preliminaries’ as:
“… preliminaries that relate specifically to building work which is to be carried out by a subcontractor. Costs associated with subcontractor’s preliminaries are to be included in the unit rates applied to sub-elements and individual components.”
Where, a ‘subcontractor’ is:
“… a contractor who undertakes specific work within the building project; known as specialist, works, trade, work package, and labour only subcontractors.”
Generally, subcontractor prelims such as staffing costs, plus their own overheads and profit, are included in their rates for works items. There may be situations where this is not appropriate, for example if there is an element of subcontract design work required or a specialist item of plant which they may decide to price individually.
If the developer or Principal Contractor is providing the welfare facilities and other obligations in accordance with Schedule 2, subcontractors will not need to allow for these costs. However, they will be expected to allow for specific hand-held plant and equipment plus items such as task lighting either in their rates or as separately identifiable items.
How should subcontractors price prelims?
Subcontractors, depending on the value of the package of works, are likely to allow prelims as a direct percentage add on to the value of their direct works. If the package of works is larger in value then it would make sense to require a more comprehensive approach such as that required by the main contractor.
There are advantages to a percentage approach such as the ease of administration when valuing the works and considering the value of variations. The downside is that if the percentage is high, but the works vary considerably, you could face a disproportionate increase in value.
Preliminaries are necessary costs to deliver the project, but they form no part of the finished works. The prelims description should set out the requirements generally as a whole and not be specific to any type of trade or element of the works. The format should be clear how the management, resources, establishment and general running costs have been calculated individually and how the prelims total has been derived.
As the prelims sum is usually at least 10-15% of the direct works sum, but often higher, the need to shrewdly price prelims becomes important when preparing tender returns. If a contractor can find more efficient ways to deliver the works, for example through concurrent working or more efficient phasing of the, they will be able to reduce their overall programme and produce significant time related savings.
Remember that when preparing the prelims price, if there are costs related to a specific element in the scope, for example a particularly detailed testing regime that is not identified in the pricing schedule, it will be deemed to have been included either in the direct works rates or elsewhere by the developer. Take care to read the entirety of the contract documents before preparing or pricing the prelims.