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<h2>What are preliminaries?</h2>
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<p><br>Preliminaries are works involved in administering a project and providing site-based services and general plant facilities. Section A of SMM7 covers these items. These relate to the contract as a whole. In addition, these are not confined to any particular work section. Similarly, it is shown in Section B of the SLS573:1999. </p>
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<p>Providing these in a separate bill, the contractor has the opportunity to price them independent of unit rates. Accordingly, any costs included in the preliminary items shall not include again in the unit rates. <em>Overheads are the cost</em> component <em>in the unit rates for support activities, such as site or head office staff or temporary</em> <em>workshops. These are not covered by specific items in the Bills of Quantities.</em> Thus, contractually speaking, preliminaries and OH &amp; P are different items. Therefore, the Contractor is not supposed to include the cost of preliminaries in unit rates.</p>
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<p>The Preliminaries section of the tender documentation fulfills a number of functions from the estimator's point of view. It provides a high-level overview of the project. For instance, it includes a description of the project, the detail of the site, details of the conditions of the contract, Employer‟s requirements, Contractor‟s general cost items, etc.<br></p>
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<h2>Items included under preliminaries</h2>
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<p>In the Preliminary bill, following items of temporary works, which are not represented in the permanent work items, are included as necessary.</p>
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<ol><li>Project Particulars</li><li>Drawings</li><li>Site and Access</li><li>Description of the Works</li><li>Insurances and Bonds</li><li>Supervision / staffing/ site management</li><li>Safety / health / welfare</li><li>Scaffolding</li><li>Safeguarding the work</li><li>Water for works</li><li>Lighting &amp; power</li><li>Temporary roads</li><li>Site accommodations</li><li>Temporary fences, hoardings</li><li>Name board</li><li>Setting out, surveying, testing, etc.</li></ol>
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<h2>Pricing preliminaries</h2>
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<p>There are large numbers of items under preliminaries. However, we cannot exactly price the cost of all of them. Therefore, we consider major costs which include staff, contractor‟s equipment, access roads, scaffolding, site accommodation,<br>temporary supplies, cleaning, etc. </p>
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<p>Pricing preliminaries is generally one of the last operations before adjudication of the tender price. <em>The process of converting an estimate into a tender is usually termed as ‘tender adjudication’</em>. A decision on working methods, major equipment, gang strengths, subcontractors, temporary works such as scaffolding, roads, hutting, etc., and the proposed construction program have all been identified when pricing preliminaries.</p>
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<p>This will indicate any need for overtime or out-of-sequence working to meet the contract completion date. It may identify the costs of any potential liquidated damages that need to be included in the tender sum. It will also allow assessment of any provision for cost fluctuations in the case of a fixed price tender.<br>Individual contractors have their own checklist of items to assist the estimator in calculating site overheads.<br></p>
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<h2>Fixed and time-related charges</h2>
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<p>Main components of a preliminary item are as follows:</p>
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<ul><li>Fixed charges - the cost of which is to be independent of duration. That is to say, charges those are not proportional either to the quantity of the work or its duration.</li><li>Time-related charges - the cost of which is to be dependent on duration. That is to say, charges that are directly proportional to either the quantity of the work or its duration.</li></ul>
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<h2>How to analyze a preliminary item</h2>
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<h3>Example 1 – Temporary Accommodation</h3>
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<p>The contractor shall provide suitable accommodation for the clerk of works, with a minimum floor area of 20 m2 including desk, four chairs, filing cabinet and all necessary air conditioning, lighting and<br>cleaning.<br>In this case, contractor decides to use container hut converted as an office.</p>
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<h4>Data</h4>
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<p>Contract period: 144 weeks, Transport of container to and from site: Rs: 15,000.00 per trip, Hire of container hut: Rs: 3,000.00 per week, Hire of furniture, etc.: Rs: 500.00 per week</p>
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<h4>Fixed charges</h4>
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<p>Transport to and from site 2 trips × Rs: 15,000                      = 30,000.00<br>Erection 10 hours &amp; Dismantle 5 hours of unskilled labor<br>       15 hours laborer @ Rs: 1,500                                              = 22,500.00<br><strong>Total of fixed charges </strong>                                                              =  <strong>52,500.00</strong></p>
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<h4>Time related charges</h4>
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<p>Hire of hut 144 weeks @ Rs: 3,000 per week                          = 432,000.00<br>Furniture and other 144 weeks @ Rs: 500 per week            =    72,000.00<br>Cleaning – 2 hours per week × 144 weeks<br>         288 hours @ Rs: 125                                                            =    36,000.00<br><strong>Total of time related charges                                                 = 540,000.00<br>Total (fixed and time related charges)                               = 592,500.00</strong><br></p>
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<h3>Example 2 – Site Fencing</h3>
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<p>The contractor is to allow for enclosing all boundaries of the site. It shall be the contractor‟s responsibility to provide all necessary precautions, protection and security to safeguard the works using fences, hoardings, gates, etc. as considered necessary.</p>
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<h4>Data</h4>
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<p>Contract period: 144 weeks<br>Fencing<br>Fixed charges; erection and taking down                                  = 20,000.00<br>50 metres of solid fencing; 1.8 metres high @ Rs: 300.00 / m = 10,000.00<br>1 pair gates and security                                                                = 5,000.00                                 </p>
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<p>                                                                                                             =           <strong>35,000.00</strong><br>Maintenance and repairs<br>1 hour per week labourer × 144 weeks @ Rs: 125                     =          <strong>18,000.00</strong><br>Total                                                                                                    =          <strong>53.000.00</strong><br></p>
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<h3>Payments for preliminaries in interim bills</h3>
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<p>There is no specific contract provision governing how to pay for preliminaries.</p>
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<h4><strong>1st method</strong> - Time Related</h4>
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<p>Some consultants pay for preliminaries in Interim bills considering the total contract time. </p>
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<p>Example:           Total Contract Value                                          = Rs: 1,000,000.00<br>                            Preliminaries                                                      = Rs: 200,000.00<br>                            Permanent Works                                              = Rs: 800,000.00<br>                           Contract Period                                                    = 05 months<br>In each interim bill add Rs: 200,000.00 / 5 = Rs: 40,000.00 to the value of completed permanent works to arrive the total bill value.</p>
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<h4>2nd <strong>method</strong> - Work Related</h4>
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<p>Some consultants pay for preliminaries in Interim bills calculating a proportionate value to the value of permanent works completed up to that interim bill. </p>
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<p>Example:           Total Contract Value                                          = Rs: 1,000,000.00<br>                            Preliminaries                                                      = Rs: 200,000.00<br>                            Permanent Works                                              = Rs: 800,000.00<br>                            Contract Period                                                   = 05 months<br>Value of permanent works completed up to 3rd Interim bill = Rs: 400,000.00<br>Add Rs: (400,000.00 x Rs: 200,000.00)/ Rs: 800,000.00 = Rs: 100,000.00 to the value of completed permanent works to arrive the total bill value.<br></p>
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<h4>3rd <strong>method - Reasonable Method</strong></h4>
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<p>However, in both methods mentioned above, contractors do not get money immediately after they have completed the particular preliminary item.<br>Therefore consultants prefer to obtain the exact time of expenditure from the Contractor and pay accordingly.<br>As per Clause 27.1 of the ICTAD / SBD / 01, the contractor has to submit a work program showing the timing of all the activities in the B.O.Q. for the approval of the Engineer. At that time, the Contractor can submit when he plans to carry out items mentioned in the preliminary bill. After obtaining approval for the work program from the Engineer, the Contractor can include his actual expenditure of preliminary bill items into the respective Interim bill.</p>
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<p><br>ICTAD Publication no: ICTAD / ID / 04 – Guidelines for the preparation of Bill no. 1 – Preliminaries for Building Works suggest how to pay for preliminaries in interim valuations. If the Engineer includes a payment scheme in the Contract Document, contracting parties can follow it during the post-contract period. For example, it suggests paying 60% on completion of the structure, 30% in equal installments during the contract period, and balance 10% on dismantling and removal on completion for <em>Temporary</em> <em>Office Facilities for Engineer</em>.</p>
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<p></p>
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<h3>Case Law</h3>
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<p><strong>Should a contractor allow for preliminaries associated with the expenditure of provisional sums in tendering or will they be paid as an extra in the final account</strong>?<strong> </strong></p>
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<p><strong>St Modwen Developments Ltd v Bowmer and Kirkland Ltd (1996)</strong><br>A dispute arose as to whether the contractor was to include extra in his price for profit and the costs of attendance on the subcontractors. The word “inc” was inserted in the Bill of Quantities alongside the item. Accordingly, The contractor contended that “inc” meant that the profit and attendance were included in the Provisional Sum and claimed that he would be entitled to the profit and attendance separately. After that, the matter was referred to arbitration and the contractor was successful. </p>
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<p>The High Court heard the appeal against the arbitrator's award.  And the High Court judge also supported the Arbitrator's award. In addition, the judgment stated that “therefore in the same way that a contractor would not be in a position to know and therefore the price for the preliminaries of the type referred to in SMM6 in respect of a provisional sum for, say contingencies, BK in these circumstances are not deemed to have allowed for such preliminaries in their tender.”</p>
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<p></p>
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