Preliminaries are the costs incurred by the contractor in running the site, as distinct from the costs of carrying out the permanent works. They include the cost of site management and supervision, site accommodation, temporary works, plant on hire, security, scaffolding, temporary services, insurance and bonds, and a wide range of other items that are necessary for the execution of the works but are not measured as part of the works themselves.
Preliminaries are typically classified as either time-related (where the cost depends primarily on the duration for which the resource is on site — site management, accommodation, plant on hire, security) or fixed (where the cost is incurred once and is largely independent of duration — site set-up, mobilisation, demobilisation, certain temporary works). The distinction is important because time-related preliminaries are the principal head of prolongation cost in a delay claim, while fixed preliminaries are not generally affected by delay.
The proper pricing of preliminaries at tender stage is a challenging exercise. The estimator must identify each item of preliminary required for the project, quantify the resources required, apply appropriate rates, and aggregate the result. The total figure is then typically expressed in the tender as a lump sum or as a series of items, with a defined breakdown between fixed and time-related components.
On a project that proceeds without delay, the preliminaries are recovered through the interim payment mechanism in accordance with the contract. Time-related preliminaries are typically paid in equal monthly instalments over the contract period, while fixed preliminaries are paid at the relevant milestones (typically a substantial proportion at site set-up and the balance at demobilisation). The mechanism is straightforward but requires careful drafting in the contract.
Where the project is delayed and the contractor claims prolongation cost, the assessment of additional preliminaries is the principal head of the claim. The starting point is the contract preliminaries breakdown — what was the contractor allowing for each item, and on what basis? The next step is the identification of the cost actually incurred during the period of delay — what resources were on site, for how long, and at what cost? The two are then reconciled to identify the additional cost properly attributable to the delay.
A common pitfall is the use of the tendered preliminaries rate as a proxy for the actual cost of preliminaries during the period of delay. The SCL Delay and Disruption Protocol recommends, and most experienced tribunals accept, that prolongation cost should be assessed by reference to the actual cost incurred during the period of delay, not by reference to the tendered rate. The tendered rate may be either understated or overstated relative to the actual cost, and either way it is not the proper measure of recoverable cost.
Our quantum experts at Construction Expert Witness have substantial experience of pricing, evaluating and adjudicating preliminaries claims on Middle Eastern projects. We bring discipline and transparency to an area of construction quantum that is frequently disputed and rarely properly substantiated.