Challenges in pricing preliminaries costs for contractors: An Australian case study

Fig. 1:

Projects involved by respondents by type and value

Sub-questions	Projects ($1 m – $5 m)	Projects ($5 m – $20 m)	Projects ($20 m – $100 m)	Projects ($100 m plus)	Not active in this_category of projects
Commercial all types (non-residential)	17.86	25.00	32.14	57.14	14.29
Residential work	10.71	17.86	10.71	35.71	46.43
Civil works	7.14	10.71	17.86	14.29	60.71
Refurbishment and alterations	21.43	17.86	32.14	10.71	50.00
Fit out works	25.00	21.43	32.14	10.71	42.86

Impact of building price escalation (annual %) on estimating preliminaries

Categories	Mean
Supervision, site staff, admin staff, labourers, etc.	6.80
Insurances, guarantees and fees, permits, paperwork, etc.	6.40
Running costs (keeping the site going – Staff excluded)	6.00
Final cleaning & handover, commissioning (some costs at the end of the job)	5.87
Head office overheads and other costs (e.g. finance, contingency, etc.)	5.20
Establishment/disestablishment of the site (getting the site up and running and then shutting it down)	5.07

Administrative challenges in estimating preliminaries (Likert scale 1–5)

Sub-questions	Mean
Understanding of the client’s main expectations, goals and specifications	3.29
Insufficient preparation time during the tender period	3.24
Costs of permits, consultants, special environmental requirements	2.94
Late responses from designers/engineers to queries raised	2.88
External factors, unions, pandemic (COVID)	2.82
Ambiguities/omissions within the tender or contract documents	2.59
Difficulty obtaining bank guarantees/insurance, financial markets	2.59
Unreliable historical cost information/subcontractor pricing	2.41
Providing for project IT services and client expectations on reporting	2.41
Lack of itemised bills of quantities for prelims	1.76

Percentage of preliminaries costs per activities (scale 0–100)

Sub-questions	Mean (%)
Supervision, site staff, admin staff, labourers, etc.	44.57
Running costs (keeping the site going – Staff excluded)	12.48
Establishment and disestablishment of the site (getting the site up and running, and then shutting it down)	12.40
Insurances, guarantees and fees, permits, paperwork, etc.	11.51
Head office overheads and other costs (e.g. finance, contingency, etc.)	9.90
Final cleaning & handover, commissioning (some costs at the end of the job)	9.14

Types of schedules of preliminaries used at the estimating/tender stage

Sub-questions	Total (%)
Company standard schedule (from Estimating Dept.)	65.00
Combination standard schedules and external sources e.g. quotations, pricelists	30.00
Company standard schedule (from Bid Manager/Finance Dept.)	5.00
Once off unique project schedule based on contract conditions	0.00
Industry-standard schedule based on standard proformas (ASMM, CIOB, MBA, RICS etc.)	0.00

Buildability/constructability challenges in estimating preliminaries (Likert Scale 1–5)

Field	Mean
Complexity of work, e.g. site restrictions, high lifting, material handling (Cranages, Alimaks, etc.)	3.53
Different methodologies adopted within contractors and subcontractors	3.40
Access and temporary works required in each construction stage	3.27
Alternative construction methods suggested by the construction manager	3.13
Having access to existing site facilities on REFURBISHMENT projects	3.13
Difficulties in clarifying methodology and programming the works at tender time	2.87
Difficulty in predicting weather-related events with construction phases	2.73
Temporary accommodations and site amenities, including subcontractors and client needs	2.73
Regulatory issues, codes and byelaws affecting site operations (dust, noise, etc.)	2.67
Storage and parking areas	2.67
Poor responses from designers/engineers to technical queries raised	2.60

Most likely elements of preliminaries where costs increase/overrun occur, apart from any costs associated with a programme (delay or gain)

Answer	%
Supervision, site staff, admin staff, labourers, etc.	43.34
Cranage, including associated labour	20.00
Final cleaning & handover, commissioning (some costs at the end of the job)	10.00
Site setup, including accommodation, hoardings, gantries, etc.	10.00
Running costs (keeping the site going – staff excluded)	6.67
Insurances, guarantees and fees, permits, paperwork, etc.	6.67
Waste during construction, rubbish removal, etc.	3.34

Most likely elements of preliminaries where cost savings occur, apart from any costs associated with a programme E(delay or gain)

Answer	%
Site setup, including accommodation, hoardings, gantries, etc.	28.57
Running costs (keeping the site going – staff excluded)	23.81
Waste during construction, rubbish removal, etc.	14.29
Insurances, guarantees and fees, permits, paperwork, etc.	9.52
Supervision, site staff, admin staff, labourers, etc.	9.52
Final cleaning & handover, commissioning (some costs at the end of the job)	9.52
Cranage, including associated labour	4.76

List of suggested categories from the ANZSMM

Contractual	Site conditions
1. Working hours	20. Charts, schedules
2. Rates and wages and prices of materials	21. Notice board
3. Sub-letting	22. Setting out works
4. Progress and final certificates and	23. Temporary installations
5. Variations	24. Services
6. Dates for commencement and completion	25. Telephone calls
7. Bonus for early completion	26. Temporary screens, fences, hoardings, guard rails, etc.
8. Liquidated damages	27. Temporary roads, tracks, crossing, etc.
9. Rise and fall	28. Temporary sheds, sanitary accommodation, etc.
10. Exemption from duty sales or other taxes	29. Duties and attendance
11. Issue and return of documents	30. Work outside the contract
12. Discrepancies	31. Supplied goods
13. Submission of priced bills of quantities	32. Samples
14. Contract agreement stamp	33. Testing
15. Payment of taxes	34. Advertising
16. Notices, permits, fees	35. Footpath levels
17. Liability	36. Plant equipment and attendant labour
18. Bonds, guarantees	37. Scaffolding
19. Payment of extra monies	38. Attendance
	39. Protection
	40. Cleaning
	41. Handing over
	42. Defects liability

Examples of preliminaries schedules from two Australian contractors under two different procurement methods

Case A (construction only – BB)	Case B (design and build – DBB)
Labour and supervision	Supervision
Site supervision	Project Manager, Site Manager, Design Manager, Cost Planner, Administrator, Assistant Administrator, Design and Documentation Coordinator, Site Coordinators, Site Supervisors, Site Supervisors, Services Manager, Construction Planner, Quality Manager, Site Secretary, Tenancy Coordinator, OH&S Manager
Other	Contractors Labour
As built drawings and documentation, operation and maintenance manuals	Cleaning Labour and others
Insurances	Fees & insurances
Authority charges	Building administration fund (building control commission)
Authority service provider headwork fees and charges	Hoarding & gantry permits
Professional indemnity and insurance	Crossing fees
Contract works insurance	Value management facilitator
Public liability insurance	Consultants design fees
Professional indemnity & insurance	5% insurance bonds
Workers compensation	Professional indemnity insurance
Plant & equipment	Contractors’ legal fees
Bank guarantees	Contractors all risk insurance
Security – Bank guarantees charges	Public liability insurance
Fees and charges for the erection of scaffold systems, hoardings and gantries, the establishment of construction zones, footpath closures and tower crane loading zones	Plant and equipment insurance
Building permit	Warranties and guarantees
Construction industry levy	Plant & equipment insurance (contractors plant)
Main site office purchases and consumables	Site purchases and consumables
Loose furniture signage	Safety notices/inductions/safety signage
Consumption costs	Establish first aid station and consumables
Car parking	Payroll delivery, postage, couriers, kitchen supplies, etc.
Plan printing	Plan printing for trade packages (procurement)
Information management & document control systems	Progress photographs
Courier charges	Parking costs for contractor employees
Small tools	Couriers
Small tools	Small tools, nails and charges, etc. – (Built personnel)
Site establishment	Site setup
Fencing, gantries, security gates	Hoardings, fences and gates
Hoardings, fences and compounds	Gantries and overhead protection – Site camp
Temporary roads tracks crossings	Make good pavements
Temporary fencing or tree protection fencing	Site signs
Temporary services	Temporary services
Site radio communications	Power consumption during construction
Temporary electrical services	Water consumption during construction
Temporary hydraulic services	Temporary water, sewer and fire protection – Site construction
Access lighting	Temporary electrical services – Site construction
Task lighting	Fire extinguishers on site
Telephone	Site telephones and radios – MC personnel
ICT	Site telephones and radios – Trade contractors
Site offices & accommodation	Site offices & accommodation
Construction worker amenities client office	Temporary site accommodation – MC & client personnel Worker amenities, change, ablution, etc. – Total workforce Site office equipment and furniture Site office running costs, consumables, etc.
General works	Surveying, cleaning and protection
Survey	Setout and survey – Base grids
Dilapidation survey	Setout and survey – Detail trade survey
Lift opening temporary barricades	Existing conditions survey
Waste management	Waste minimisation programme
Safety requirement including OH&S requirements	Rubbish Bin hire – Tenancy fitouts
Safety site access control	Progressive cleaning – Tenancy fitouts
Dust control	Cleaning
Progressive cleaning	Site security
Final cleaning	Protective clothing
Site security control	Protection of finished works
Safety equipment	Maintenance and maintenance of protection of finished works
PPE	Supervision during defects liability period
Jersey barriers	Defect rectification during defects liability period
Materials handling	Cranage
Tower crane	Fixed tower cranage for the works including crew, crane base, erection, dismantling, hire, running costs, maintenance, tower sections, landing platforms, jumping, ties, communications and sundries, etc.
Tower crane crew including driver and dogmen	Trade mobile cranage including erection, dismantling, running costs, etc.
Mobile cranes for beam & panel lifts outside to tower crane capacity	Mobile cranage for establishment of contractor and client site accommodation
Mobile crane for general steel erection, facade, loading, service etc.	Mobile cranage for establishment of trade contractor site accommodation
Scaffolds	Scaffold and construction work method
Scaffolds	Internal and external scaffold
Temporary structures	Provision and maintenance of temporary roads
Temporary screens prevention items	Gantries and overhead protection – Site construction
Elevated work ⦁	Construction loads, temporary propping, perimeter and void safety rails attached to formwork etc.Lift barricades
Hoisting	Hoisting
Hoists, hoist driver, forklifts, loading platforms, banksman/traffic control	Man and material hoists for the works including driver, base,
flag men, concrete pumping equipment, pumps, lines, booms, etc.	erection, dismantling, hire, running costs, maintenance, sections, landing platforms, gates, jumping ties, communications and sundries, etc.
Elevated platforms, scissor lifts, boom lifts, knuckle booms, cherry pickers, swing stages etc.	Maintenance of permanent builders’ lifts

Better procurement options and risk allocation for estimating Preliminaries costs

Responses	%
Cost plus contracts or time and materials contracts	33.33
Construction management agreement/management contracting	25.93
Design and build (or novated D&C)	11.11
Lump sum (fixed price) contracts	11.11
Alliance/joint venture contracting	7.41
Procurement options are not that relevant	7.41
Term (unit price/schedule of rates) contracts	3.71

Percentage of preliminaries costs time-related (scale 0%–100%)

Sub-questions	Mean (%)
Time-related (for the WHOLE duration of the project)	45.49
Combined fixed charge and time charge during the WHOLE project	19.83
Fixed (once-off payment)	18.95
Time-related but for only a shorter duration or phase of the project (not required for all the project)	15.73

Values (metrics) most useful in the pricing preliminaries categories

Question	Site area m2 based	Project size (GFA) area based	Project size m2 height and volume considered	Project value $	Other
Establishment and disestablishment of the site (getting the site up and running, and then shutting it down)	26.67	10.00	14.29	6.45	19.35
Insurances, guarantees and fees, permits, paperwork, etc.				93.33	3.23
Supervision, site staff, admin staff, Labourers, etc.		20.00	28.57	9.68	19.35
Running costs (keeping the site going – Staff excluded)		10.00	28.57	9.68	22.58
Final cleaning & handover, commissioning (Some costs at the end of the job)		60.00	28.57	3.23	12.90
Head office overheads and other costs. (e.g. finance, contingency, etc.)				53.33	22.58

Preliminary costs should be front-loaded into payment schedules

Answer	%
Definitely not	13.33
Probably not	13.33
Might or might not	33.33
Probably yes	26.67
Definitely yes	13.33