Preliminaries, the cost
most firms forget to price.

Preliminaries are the costs of running the job rather than of doing any particular item of work: supervision, welfare, access, temporary services, insurances, plant standing and the time either side. Most of them are driven by how long the job lasts, and most firms price them as a percentage of the measured work, which is why they are the most under-priced part of a tender.

Time-related costs priced as a percentage

Here is the whole argument, and it is arithmetic rather than opinion.

Your site manager costs the same per week whether the gang lays a hundred metres or fifty. So does the welfare unit, the scaffold standing, the site insurance and the compound. Those costs are a function of weeks.

Price them as a percentage of the measured work and you have tied a weekly cost to a quantity. On a job that runs to programme, the percentage is roughly right by accident. On a job that takes three weeks longer, the measured work has not changed, so the percentage has not changed, so you have three weeks of supervision, welfare and standing plant with no revenue attached to them. That is not an overrun cost. That is a pricing error that only becomes visible when the programme moves.

Price prelims as a percentage and every week the job slips comes straight out of margin, because the quantity that generated the percentage did not slip with it.

It also explains a symptom that puzzles firms and is described in how to tell whether you are underpricing: the jobs that make money are the small ones. Small jobs are short, so a percentage covers their limited time-related cost. The bigger and longer the job, the more of it is weeks, and the further a percentage falls behind.

What actually belongs in prelims

Wider than most firms allow for. In four groups.

• People not fixing anything. Site manager or supervisor, foreman where they are not on the tools, banksman, gateman, and the proportion of a contracts manager's week this job consumes.
• The site itself. Welfare and its servicing, cabins, compound, temporary power and water, lighting, hoarding and signage, security, waste and skips, cleaning, and consumables that belong to no single item.
• Access and plant that stands. Scaffolding for the duration rather than for the erection, towers, hoists, and any plant that is on the job whether or not it is working. This is where off-hire discipline turns into a pricing question.
• Everything either side of the work. Mobilisation and demobilisation, setting out, surveys, the health and safety documentation the job requires, testing and commissioning, snagging, the operation and maintenance manuals, and the time it takes somebody to close the job out. That last group is the most consistently forgotten, because it happens when everyone has mentally moved on.

Build them from the programme

The correction is straightforward and takes an hour longer than a percentage.

1. Take the programme, in weeks. If you do not have one, that is the first problem, because you are pricing a duration you have not estimated.
2. Split the list above into fixed and time-related. Mobilisation is fixed: it happens once. Supervision is time-related: it happens every week. Most items are obviously one or the other.
3. Price the fixed items as sums and the time-related items as a weekly rate.
4. Multiply the weekly rate by the programme, and add the fixed sums.
5. Write the weekly rate down where you can find it, because it is the number you will need the moment anybody asks for an extension of time or a prolongation cost.

That last step is worth more than the pricing improvement. A firm that knows its prelims cost per week can answer a delay claim with a figure. A firm that priced a percentage has no number at all and ends up negotiating against one the other side produced.

When the client wants them cut

Prelims are visible in a tender and clients push on them, sometimes on the reasonable basis that they look like overhead.

Two responses that work better than reducing the number. Reduce the duration, not the weekly rate: if the client wants the prelims down, the honest lever is a shorter programme, and offering that turns a haggle into a joint problem. Or move a genuinely discretionary item out of prelims and into an option the client can decline, so what remains is defensible line by line.

What not to do is shave the weekly rate to win the job while planning the same site set-up. That is a decision to lose the difference, taken at tender, and it will not be recovered.

On a subcontract package

Worth a note, because subcontractors are often told prelims are the main contractor's problem.

Some are, genuinely: you are not paying for the welfare or the hoarding. But a subcontract package still carries its own time-related cost, and it is regularly priced at zero. Your supervision while your gang is on site. Your plant standing between the times you can get access. Your time attending progress meetings. Mobilising twice because the programme moved and you left and came back.

That last one deserves naming, because remobilisation is the most common uncompensated cost in subcontracting and it is entirely a prelims question. If the programme moves and you are asked back, that visit has a cost, and whether you recover it depends on whether it was ever a number.

Where to start, on Monday

Work out your prelims cost per week for one live job. Supervision, welfare, standing plant, insurance, everything that recurs, divided into a weekly figure. Most firms have never had this number and it takes half an hour.

Then look at the last job that ran over. Multiply the weeks it slipped by that figure. That is what the overrun actually cost you in prelims alone, and it is usually a larger number than anybody in the business had assumed.