Pricing Preliminaries: The Costs That Make or Break Your Tender

Ask five small contractors how they price their preliminaries and you'll get five different answers. One uses a percentage of the measured works. One has a standard figure per week. One doesn't price them separately at all — they're "allowed for in the rates." And at least one will admit they just guess.

The problem with all of these approaches is that preliminaries are the single largest cost element that's entirely within your control to estimate accurately — and getting them wrong can swing a £2m project from profitable to loss-making.

On a typical commercial fit-out, preliminaries account for 12% to 18% of the contract sum. On a 20-week programme, that could be £240,000 to £360,000 on a £2m job. If your estimate is 15% off, that's £40,000 to £50,000 of margin gone before a single subcontractor lifts a tool.

What Preliminaries Actually Cover

Preliminaries are the time-related and fixed costs of running a project that aren't directly related to the physical works. They broadly fall into three categories:

Management and supervision. Site manager, project manager, QS time (if dedicated to the project), setting out engineer. These are your people costs — salaries, travel, subsistence.

Site establishment. Offices, welfare facilities, storage, temporary services (power, water, telephone/internet), signage, hoarding, site security, cleaning, waste management, skip hire.

Plant and equipment. Tower crane or mobile crane hire (if applicable), hoists, scaffolding, temporary access equipment, site vehicles, small plant. For fit-out projects, this is usually relatively modest compared to new-build, but it still needs accounting for.

Insurance and professional fees. Contract works insurance (if not provided by the employer), public liability, professional indemnity (if required), bond costs.

Compliance and administration. Health and safety management, environmental management, quality management, testing and commissioning coordination, as-built drawings preparation, O&M manuals.

Time-Related vs Fixed Costs

The distinction between time-related and fixed costs is critical, because it determines what happens when the programme changes.

Time-related costs are proportional to the project duration. If the project runs 20 weeks, you pay for 20 weeks of site manager, 20 weeks of welfare, 20 weeks of skip hire. If the project extends to 24 weeks because of employer-caused delays, your time-related costs increase and that's a prolongation claim.

Fixed costs are one-off regardless of duration. Hoarding erection and dismantling, initial site set-up, final clean, O&M manual preparation. These don't change if the project takes an extra month (unless the scope changes).

When pricing your tender, separate these clearly. A prelims build-up that says "site set-up: lump sum £15,000" doesn't help you if you need to calculate prolongation costs later. But a build-up that says "site manager: £1,850/week x 20 weeks = £37,000" gives you a clear basis for a weekly prolongation rate.

How to Build It Up Properly

Start with the programme. Your preliminaries estimate is only as good as your programme. If the programme says 18 weeks but the job will realistically take 22, your time-related prelims are 20% too low from day one. Be honest about the programme duration — it's the foundation of the whole calculation.

List every cost item. Don't rely on memory or percentages. Go through the project methodically. What management staff will be on this job, and for how long? What welfare facilities do you need? What temporary services? What plant? What testing? What administration?

For each item, determine whether it's time-related or fixed, and price it specifically. If you need a site manager for the full duration at £1,800 per week, write that down. If you need a QS for two days a week for the first 12 weeks and one day a week for the remaining 8, price that separately.

Account for mobilisation and demobilisation. The first and last weeks of a project have different costs from the middle. Mobilisation: setting up the site compound, installing hoarding, establishing temporary services, initial deliveries. Demobilisation: stripping out temporary works, removing the compound, final cleaning, making good. These are often underestimated.

Include the things people forget. Testing and commissioning coordination. Builders work in connection with services (making good after M&E installations). Protection of finished work. Security during holiday shutdowns. Document handover preparation. These items aren't glamorous but they're real costs, and if they're not in your prelims, they're coming out of your margin.

Check against historical data. If you've done similar projects before, compare your build-up against the actual prelims costs on those jobs. What did you spend? Where did you go over? Where did you come under? Historical data is the best reality check for a tender estimate.

The Common Traps

Using percentages instead of first principles. "Prelims are always 15% of the measured works" is a dangerous assumption. A fast-track project with a tight programme will have higher prelims per week than a straightforward one. A project in central London with restricted working hours and no storage space will cost more to run than one on a greenfield site with a compound.

Underpricing management time. Small contractors routinely underprice their own management time because "that's what I do anyway." If you're spending 60% of your working week on a project, that project needs to cover 60% of your cost. Free project management isn't a business model — it's a subsidy that comes directly from your profit.

Forgetting overlap periods. On a project with phased handover or sectional completion, you might be running the site for the final section while de-mobilising from earlier sections. That overlap has cost implications — you still need site management, welfare, and services even when most of the work is complete.

Not including tender costs. The cost of preparing the tender — estimating, site visits, subcontractor enquiries, document preparation — is a real cost. On a small firm tendering for £2m projects, the tender cost might be £5,000 to £15,000 per bid. If you win one in four, you're spending £20,000 to £60,000 in tender costs for every project you win. That needs to be recovered somewhere.

Prelims in the Final Account

Your preliminaries build-up becomes an important document at the end of the project. If you're claiming prolongation costs due to employer-caused delays, your weekly prelims rate — broken down into its component parts — is the basis for the calculation.

A well-structured prelims build-up makes prolongation claims straightforward: 6 weeks of delay x £8,500 per week in time-related prelims = £51,000. A lump-sum allowance with no supporting detail makes the same claim an argument.

Similarly, if variations change the scope or duration of the works, the prelims adjustment should reflect the actual cost impact. Additional management time, extended plant hire, prolonged welfare provision — all recoverable if you can demonstrate the link between the variation and the additional cost.

Getting It Right

Pricing preliminaries properly takes time at tender stage. Half a day, maybe a full day for a complex project. But that investment pays for itself many times over — in a more accurate tender, a clearer picture of the project costs, and a solid foundation for any commercial claims that arise during the works.

At Construction AI, the tender module includes structured prelims pricing with time-related and fixed cost breakdowns, linked to the programme duration. The financial module then tracks actual prelims expenditure against the tender allowance through the project — so you can see whether you're on budget or heading for trouble before it's too late.

Stop guessing. Build it up. And price the job as it actually costs to run, not as you hope it will.