Preliminaries (Construction)

Preliminaries — often called "prelims" — are the costs of being on site, as opposed to the costs of building something. They're the overhead that keeps the project running: management, infrastructure, compliance, and logistics. On most projects, prelims represent 10-15% of the total construction cost. They're also the line item most likely to blow out when a project runs long, which is why every developer needs to understand what's in them and how they behave.

What's actually included in prelims? The list is longer than most people expect. Site establishment covers temporary fencing, hoarding, site signage, the site office or shed, amenities (toilets, lunch room, first aid), and temporary power and water connections. Supervision includes the site manager's salary, the project manager's time, and any admin support. Then there's insurance — contract works insurance, public liability, and workers compensation. Scaffolding is a major prelim item on multi-storey projects, often costing thousands per week in hire charges. Crane hire is another big one — tower cranes can run $15,000 to $25,000 per month depending on the size. Add in temporary traffic management, waste removal, security, safety equipment, surveying set-out, and quality documentation, and you're looking at a substantial monthly burn rate.

Prelims are typically quoted either as a lump sum for the project duration or as a monthly rate multiplied by the programme length. The monthly rate approach is more transparent — and more dangerous for developers. Why? Because prelims are fundamentally time-dependent. If a project runs four months longer than planned (due to variations, delays, weather, or contractor underperformance), the prelims bill increases proportionally. On a project running $80,000 per month in prelims, a four-month delay adds $320,000 to your costs. That's money straight off your margin.

This is why prelims are a critical consideration in feasibility studies. The construction programme drives the prelim cost, and the prelim cost feeds directly into your total development cost and margin calculation. Underestimate your programme by even a few months and your feasibility margin gets eaten. Experienced developers budget conservatively for programme duration and include a specific contingency line for extended prelims — often 10-15% on top of the base prelim allowance.

Prelims also explain why contractors care about programme so much. The faster they finish, the less they spend on prelims — and the more margin they make. This alignment of interests is one of the few areas where developer and contractor incentives naturally point in the same direction. But it cuts both ways. A contractor who prices a tight programme to win the tender, then blows it during construction, will try to recover their additional prelim costs through extension of time claims or disruption variations. You need to scrutinise programme assumptions at tender stage, not after the contract is signed.

On delayed projects, prelims become the silent killer of profitability. The construction cost per square metre might look fine, but when you add six months of extended prelims plus the holding cost impact (additional interest on your development finance), the project economics shift dramatically. A project that was viable at a 12-month build programme might be marginal at 18 months — and the difference is almost entirely prelims and holding costs.

When comparing tenders, don't just look at the total prelim figure. Ask for a breakdown. Some contractors bury margin in prelims to make their trade costs look competitive. Others understate prelims to win the job, then claim extensions for every delay knowing the prelim recovery will pad their margin. Understanding what's in the prelim breakdown — and challenging items that look inflated or understated — is a basic part of tender evaluation that too many developers skip.