Our guide answers questions such as: What is included in construction preliminaries? What is the usual percentage of preliminaries in construction contracts? And why are preliminaries in construction important? Read on to find out more.
What are preliminaries in construction?
Preliminaries or ‘prelims’, are costs that are essential for the completion of a project, but aren’t reflected in the finished build. They’re separate from the costs tied to your work schedule, but equally as important for getting the job done.
Preliminaries cover costs associated with the wider construction project – they’re not tied to specific aspects of construction work. For example, on-site facilities such as toilets, project management fees, scaffolding, and on-site lighting are essential for construction work, but they’re not tied to a specific phase of construction.
Preliminaries can be fixed, one-off, or ongoing costs. For example, you might need to pay a project manager for the entire duration of a project. But paying for an environmental assessment might just be a one-off fee. In a construction contract, preliminaries combined with your work sections describe the entire scope of the construction project. And all the costs for specific phases and the project as a whole.
Who calculates the preliminaries in construction projects?
The main contractor is usually the best person to calculate the preliminaries as part of their bill of quantities. That’s because they’ll have oversight of all the key components of a construction project.
As part of your construction project management, you should develop your set of preliminaries to be inclusive of everything you need to complete the project – so you can generate a fair and representative bid.
Including preliminaries in your scope of work gives clients, contractors, and subcontractors a holistic view of the project. This means there aren’t any nasty cost surprises for clients (or your construction business) later down the line.
Examples of preliminaries in construction
There are many different types of preliminary costs, in the same way that there are many different types of construction projects. Note: preliminaries aren’t the same thing as overheads, which are general costs relating to the operation of your business (and not a specific contract or project).
Preliminaries are items and costs needed to complete a project that aren’t tied to a specific aspect of the work.
Here are some common construction preliminaries examples:
- Administration and project management: These preliminary costs are associated with the management and coordination of a construction project. Fees for project managers, documentation, and quality assurance fall within this category. Also, progress reporting and coordination with stakeholders.
- On-site set-up and preparation: Site clearing, grading, and excavation fall within this category. Any activities that help to prepare the site and create the infrastructure needed for a successful construction project. It includes setting up on-site offices, toilets, and power and water utilities.
- Design and approvals: Paying designers and engineers to refine the project design will fall within this category. You might also include costs for obtaining permits and approvals from the local council, as well as surveys and environmental assessments.
- Health and safety, and environmental compliance: Making sites safe has costs attached, which you might include as preliminaries. Examples are providing safety equipment and personal protective equipment (PPE), and developing and implementing safety plans.
Usual percentage of preliminaries in construction contracts
To simplify the calculation of preliminaries, you might choose to charge for these as a percentage of the overall construction contract. There’s no set rate for this, but the usual percentage of preliminaries in construction contracts ranges between 5-15%.
Depending on the scope of your project, charging for the total preliminaries might be better than charging a percentage. Larger, more complex projects often require more preliminaries for administration and project management.
Public infrastructure projects can incur greater preliminaries for regulatory compliance. Location can also influence the percentage of preliminaries in construction; some sites require more preparation or set-up than others. Of course, projects with higher risks also require more mitigation which can influence preliminary costs.
Make sure to run your own calculations so that you’re not selling yourself short. Take your time going through a cost estimation and budgeting process. Construction accounting software can help you keep track of projects and costs so you can increase profitability.
Preliminaries and generals in construction
Another way you might see preliminaries referred to is ‘preliminaries and generals’. The preliminaries and generals in construction projects contracts will cover the general conditions and requirements necessary to execute the project – and the costs this will incur. Preliminaries combined with the work sections of a tender document outline everything there is to know about how the work will be completed.
The importance of preliminaries in construction
The preliminary section of a tender document shows the scope of the construction project. It details the groups of items and methods needed, as well as their cost. The purpose of construction preliminaries in a contract is that it provides clarity for the recipient on pricing and project scope.
In a construction project that overlooks preliminaries, on-site facilities such as toilets, offices, lighting, and power would not be accounted for. Costs associated with project management and administration would also not be covered. As you can imagine, this would incur significant additional cost to the contractor and client.
Proper management of your preliminaries can contribute to project success. There’s less chance of a dispute further down the line if all items have been costed and presented upfront. This can also help to prevent project delays that occur when work is paused due to a change in scope.
Preliminaries in a construction contract: essential components
There’s no legal requirement to include preliminaries in construction contracts, but excluding them makes it harder for the recipient to see the full cost of a project.
Most clients will come to expect provisions and clauses associated with administration and project management; on-site set-up and preparation; design and approvals; and health, safety and environment (HSE) regulatory compliance.
If you’re looking for a construction preliminaries template, head to the Royal Institute of Chartered Surveyors’ new rules of measurement. This set of documents will help you estimate costs, as well as identify what counts as a preliminary cost. The templates can be customised for your own construction contracts.
Meanwhile, accounting software for construction enables you to track expenses, keep an eye on project progress and time spent working, and deliver your construction projects on time and within budget.
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