Preliminaries play an important part of construction contracts. Understanding preliminaries in construction helps you get the most profits from your projects while allowing for proper accounting and contract management.
Whether you work on relatively small home building jobs or large-scale corporate projects, effective management of preliminaries means you overall planning for costs improves and sets your business up for success, all while staying in control of the work you complete.
Wondering what preliminaries include and how you can use them most effectively? Here’s a quick and easy guide to everything you need to know.
Prelims can include ongoing costs
In construction contracts, preliminaries, or prelims, relate to costs that apply at a project’s start.
Sometimes, preliminaries might include ongoing costs that influence the overall duration and cost of a project. Other times, preliminaries might be restricted to one-off start-up fees that you need to pay before you can get going.
What do preliminaries in construction mean?
Preliminary costs related to a construction project can be incredibly diverse, and often, these costs make up a substantial portion of the total project cost.
Your preliminaries may cover labour, equipment, and materials, as well as permits and other important fees that must be paid before your actual build can begin.
In a construction contract, preliminaries also can account for anything you need to get the job done, from scaffolding rental to subcontractors, site electricity and more.
Preliminaries in a construction contract cover three sections
When it comes to putting together a clear and comprehensive construction contract, preliminary costs can usually be broken down into three sections. These are:
- Site establishment costs, including land take, access permits, and site accommodations and welfare facilities;
- Site running costs, including water, heating, electricity and other ongoing requirements;
- Contract costs, including fees associated with site offices, health and safety files and so on.
The diversity of construction preliminaries accurately accounts for a wide range of potential fees and to clearly represent the complexity of a construction project.
What qualifies as a preliminary cost?
Generally speaking, any costs involved in administering a project, including providing staff, materials, and site-based services, can qualify as a preliminary cost.
Preliminaries in construction often apply to an identifiable cost that doesn’t fit within any specific work sections.
Many prelims include provisional sums, site security costs, and a general risk allowance, as well as fees to cover utility supplies and design works or temporary works design.
Prelims may also include necessary costs for works to be carried out by statutory undertakers, in addition to general charges and costs associated with staffing and accommodation.
If stated in a contract, construction preliminaries can also allow for financial bonds, company guarantees, and collateral warranties as required.
What are preliminary percentages in construction?
Preliminaries in construction are relevant no matter how big or small a project you’re working.
While preliminary costs are often represented as a dollar value, you also can represent preliminary costs as a percentage of the total project fee, especially for smaller jobs.
Instead of pricing each item individually, prices can be displayed in relation to the requirements of the job at large, with variation due to site location, project scope and other influencing factors.
Preliminary percentage costs can start as low as 5 percent and rise above 15 percent, depending on the unique demands of the construction job you’re working.
What do preliminaries in construction include?
Preliminary costs in a construction contract can include a wide range of fees relating to all aspects of the project and its delivery. However, you will find a few common items that almost always appear in the preliminaries section of a construction contract. These include:
Management and administrative costs
Make Management and administrative costs an important preliminary consideration. These costs include overhead that pays for project managers, stakeholders and administrative professionals who may be involved on the job at any time during the construction process.
To protect your profitability, include management and admin costs in your preliminaries. Handling all contractors in the prelims ensures each trade budgets effectively to cover all required costs as the project progresses.
Planning and design costs
Mockup, testing, and sampling costs are diverse and can be expensive. In your construction preliminaries, these costs cover both physical and virtual mockups that allow all clients and contractors to have a clear sense of what the end goal.
These added costs can also expand to include other difficult-to-categorise processes. Here, you can include slump testing, moisture sampling and other required tests that must be undertaken to ensure site safety and material suitability for the job.
Site-based services should never be forgotten as an important preliminary inclusion. These costs relate to anything that improves the safety or efficiency of your job site, from access road creation and erosion control systems to maintaining hygiene facilities and electricity supply.
On your construction project, preliminaries might stipulate funds for damage mitigation and disturbance compensation if work could disrupt nearby neighbours and impact adjacent structures.
How should subcontractors price prelims?
Depending on the total value of your project, you can account for preliminaries as a direct percentage value. You will find this the easiest way to navigate fluctuations in pricing and project valuation.
The more complex your job is, the more likely you’ll need professional accounting support to comprehensively consider all relevant factors and determine a fair preliminary price. This can help you stay confidently on track and in charge of your project finances.
Manage Prelims with Construction Management Software
Buildxact digital software makes it easier to factor site overheads and entire-project details, producing clear, comprehensive preliminaries in no time.
Using Buildxact, you can plan construction projects meticulously, allowing for all necessary costs and calculating prelims in the most time- and cost-effective way without worrying about margins for error.
Offering intuitive financial management tools and highly accurate cost estimating resources, Buildxact allows you to design a contract that will serve your needs throughout your building works, keeping you on track to complete tasks with confidence.
Get more out of your building works and price your contract preliminaries the right way. Try Buildxact for free on a 14-Day trial or book a personalised one-on-one demo.