What Are Preliminaries in Construction? Prelims Cost Guide

<div class="ge-article-wrapper"><nav class="ge-toc" aria-label="Table of contents"><p class="ge-toc-label">In this article</p><ul class="ge-toc-list"><li><a href="#whats-included-in-preliminaries">What's Included in Preliminaries</a></li><li><a href="#worked-example-prelims-overrun-on-a-25m-project">Worked Example: Prelims Overrun on a £25M Project</a></li><li><a href="#prelims-in-evm-the-loe-problem">Prelims in EVM: The LOE Problem</a></li><li><a href="#why-prelims-overrun-and-nobody-notices">Why Prelims Overrun (and Nobody Notices)</a></li><li><a href="#common-mistakes">Common Mistakes</a></li><li><a href="#frequently-asked-questions">Frequently Asked Questions</a></li></ul></nav><article class="ge-article-body"><p>Preliminaries, prelims, are the indirect costs of running a construction project. Not the bricks, not the steel, not the labour installing them. The everything else: site offices, temporary power, welfare facilities, site management, security, scaffolding, tower cranes, and the hundred other things that make it possible for the direct work to happen. On most UK construction projects, prelims run between 8% and 15% of contract value. On a £25M job, that's £2M to £3.75M. It's real money, and it's the budget line most likely to overrun without anyone noticing. </p><p>In <a href="/en/earned-value">earned value management</a>, preliminaries are typically measured as <a href="/en/earned-value/definitions/level-of-effort">Level of Effort (LOE)</a>, which means they always show schedule performance of exactly 1.0 regardless of what's actually happening. That makes them invisible to your schedule warning system and dangerously easy to ignore. </p><p>This term is part of the <a href="/en/earned-value/definitions">earned value definitions glossary</a>. For how prelims fit into project cost reporting, see the <a href="/en/earned-value/cost-schedule-variance">cost and schedule variance page</a>. </p><h2 id="whats-included-in-preliminaries">What's Included in Preliminaries</h2><p>The NRM2 (New Rules of Measurement 2) provides the standard breakdown for UK construction. In practice, most commercial teams split prelims into fixed and time-related charges. </p><pre class="ge-ascii-diagram ge-anim"> PRELIMINARIES BREAKDOWN – TYPICAL £25M PROJECT CATEGORY MONTHLY COST TOTAL (18 months) % of Prelims ──────────────────── ──────────── ───────────────── ────────── STAFF &amp; SUPERVISION Project Manager £12,000 £216,000 6.8% Site Manager £9,500 £171,000 5.3% Senior QS £9,000 £162,000 5.1% General Foreman £7,500 £135,000 4.2% Site Engineer £8,000 £144,000 4.5% Admin/Document Ctrl £4,500 £81,000 2.5% ───────── Subtotal Staff £909,000 28.4% SITE ESTABLISHMENT Offices (hire) £6,500 £117,000 3.7% Welfare (hire + maint) £3,200 £57,600 1.8% Temp power supply £4,800 £86,400 2.7% Temp water £1,200 £21,600 0.7% IT/comms £2,800 £50,400 1.6% Setup/strip (fixed) – £85,000 2.7% ───────── Subtotal Establishment £418,000 13.1% PLANT &amp; EQUIPMENT Tower crane (inc. Op) £28,000 £504,000 15.8% Hoist £8,500 £153,000 4.8% Scaffolding (progressive) £12,000 £216,000 6.8% Small plant/tools £3,500 £63,000 2.0% ───────── Subtotal Plant £936,000 29.3% SITE RUNNING COSTS Security £9,200 £165,600 5.2% Cleaning/waste £6,800 £122,400 3.8% Insurance (fixed) – £180,000 5.6% H&amp;S (consumables + PPE) £2,400 £43,200 1.4% Environmental compliance £1,800 £32,400 1.0% ───────── Subtotal Running £543,600 17.0% TESTING &amp; COMMISSIONING Testing allowance – £120,000 3.8% Commissioning support – £120,000 3.8% Handover/O&amp;M manuals – £45,000 1.4% ───────── Subtotal T&amp;C £285,000 8.9% SUNDRIES Surveys, setting out – £65,000 2.0% Attendance on subconts £2,500 £45,000 1.4% ───────── Subtotal Sundries £110,000 3.4% ══════════════════════════════════════════════════════════════ TOTAL PRELIMINARIES £3,201,600 100.0% As % of £25M contract value: 12.8% ══════════════════════════════════════════════════════════════ Monthly prelims burn rate: ~£178,000/month (excluding fixed costs like setup, insurance, testing) </pre><p>That £178,000 monthly burn rate is the number that matters for EVM. Every month the project runs, roughly £178K of prelims accrues. If the project runs 2 months late, that's £356,000 of additional prelims cost that wasn't in the budget. This is why schedule delays have a double impact: the direct cost of the delayed work, plus the extended prelims. </p><h2 id="worked-example-prelims-overrun-on-a-25m-project">Worked Example: Prelims Overrun on a £25M Project</h2><span class="ge-worked-label">Worked Example</span><div class="ge-callout ge-anim"><p><strong>Scenario:</strong> £25M new-build school, NEC4 Option C. 18-month programme. Prelims budget: £3,200,000 (<a href="/en/earned-value/definitions/budget-at-completion">BAC</a>). Measured as LOE.</p><br><p><strong>At Month 12 (67% through the programme):</strong></p><br><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Metric</th><th>Calculation</th><th>Value</th></tr></thead><tbody><tr><td>PV</td><td>12/18 x £3,200,000</td><td>£2,133,333</td></tr><tr><td>EV</td><td>= PV (LOE)</td><td>£2,133,333</td></tr><tr><td>AC</td><td>Actual invoices and payroll</td><td>£2,480,000</td></tr><tr><td>SV</td><td>EV - PV</td><td>£0 (always, for LOE)</td></tr><tr><td>SPI</td><td>EV / PV</td><td>1.00 (always, for LOE)</td></tr><tr><td>CV</td><td>EV - AC</td><td>-£346,667</td></tr><tr><td>CPI</td><td>EV / AC</td><td>0.86</td></tr></tbody></table></div><br><p><strong>What happened:</strong> The original prelims budget assumed a senior QS at £9,000/month. The actual QS left in month 4 and was replaced by a more expensive resource at £11,500/month, a £2,500/month premium. Additionally, tower crane hire was extended by 6 weeks due to a design change in the steel frame, costing an extra £42,000. Security costs increased after two attempted break-ins, adding £1,800/month for enhanced patrols.</p><br><p><strong>The hidden story:</strong> None of this shows up in the SPI. It all hides behind the LOE mask. Only CPI reveals the problem: 0.86 means for every £1.00 of planned prelims, you're spending £1.16.</p><br><p><strong>Projected final cost:</strong></p><p>- <a href="/en/earned-value/definitions/estimate-at-completion">EAC</a> = BAC / CPI = £3,200,000 / 0.86 = <strong>£3,720,930</strong></p><p>- Projected overrun: <strong>£520,930</strong></p><br><p><strong>What the commercial team should have done:</strong></p><p>1. The design change extending the crane was a <a href="/en/earned-value/definitions/compensation-event">compensation event</a>. If properly notified and assessed, the target cost increases and the overrun reduces.</p><p>2. The QS replacement cost premium should have been flagged at month 4. Six months at £2,500/month = £15,000 that could have been challenged or budgeted.</p><p>3. The security uplift may or may not be a CE depending on the contract conditions. Worth investigating.</p></div><h2 id="prelims-in-evm-the-loe-problem">Prelims in EVM: The LOE Problem</h2><p>Most teams classify all prelims as <a href="/en/earned-value/definitions/level-of-effort">LOE</a>. That's understandable but not always correct. Some prelims activities have measurable outputs. </p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Prelims Item</th><th>Default Classification</th><th>Better Classification</th></tr></thead><tbody><tr><td>Site management</td><td>LOE</td><td>LOE (genuinely time-based)</td></tr><tr><td>Security</td><td>LOE</td><td>LOE (genuinely time-based)</td></tr><tr><td>Welfare maintenance</td><td>LOE</td><td>LOE (genuinely time-based)</td></tr><tr><td>Tower crane</td><td>LOE</td><td>Consider <a href="/en/earned-value/definitions/discrete-effort">discrete effort</a> with milestones (erect, operate, dismantle)</td></tr><tr><td>Scaffolding</td><td>LOE</td><td>Discrete effort, measurable by zones/phases</td></tr><tr><td>Site setup</td><td>LOE</td><td>Discrete effort, clear start/end deliverables</td></tr><tr><td>Testing</td><td>LOE</td><td>Discrete effort, countable tests per system</td></tr><tr><td>Commissioning</td><td>LOE</td><td>Weighted milestones, system-by-system handover</td></tr></tbody></table></div><p>By reclassifying some prelims as discrete effort, you can reduce the LOE percentage and get better schedule signals from your EVM data. I'm not suggesting you turn every prelims line item into a measured work package. But testing, commissioning, and site establishment absolutely have measurable outputs. Treating them as LOE wastes information. </p><h2 id="why-prelims-overrun-and-nobody-notices">Why Prelims Overrun (and Nobody Notices)</h2><p>Three reasons. First, prelims are time-related costs, and construction projects almost always run late. A 2-month delay on an 18-month programme adds 11% to prelims duration, and most of that is pure overrun unless it's a Client-caused delay that adjusts the target. </p><p>Second, prelims changes accumulate gradually. An extra £2,500 here, £1,800 there. No single item triggers a review. By month 12, they've compounded into a six-figure overrun. </p><p>Third, because prelims are LOE, they don't trigger schedule alerts. The only warning is <a href="/en/earned-value/definitions/cost-performance-index">CPI</a>, and most monthly reports focus on aggregate CPI rather than package-level CPI. A prelims CPI of 0.86 drowns in a project-level CPI of 0.95. </p><p>My advice: report prelims CPI separately on every monthly dashboard. Make it visible. Make it a conversation point. The moment it drops below 0.95, investigate. </p><h2 id="common-mistakes">Common Mistakes</h2><ol><li><strong>Not updating prelims budget for programme extensions</strong>: If the project is granted an extension of time, the prelims budget should increase proportionally (for time-related items). On NEC4 Option C, this is part of the compensation event assessment. Missing it means the EAC will overstate the Contractor's overrun.</li><li><strong>Lumping all prelims into one work package</strong>: A single "prelims" work package worth £3.2M is unmanageable. Break it down: staff, establishment, plant, running costs, testing. At minimum 4 to 5 sub-packages. This lets you identify which category is overrunning.</li><li><strong>Forgetting that prelims extend with delays</strong>: A 2-month delay doesn't just cost the direct acceleration or disruption. It costs 2 additional months of site management, crane hire, welfare, security, and everything else. This extended prelims cost is often the largest component of a delay claim.</li><li><strong>Treating tower crane hire as LOE</strong>: A crane is a discrete piece of plant with a defined mobilisation, operational period, and demobilisation. Track it with milestones or as a cost-loaded activity in the programme. LOE classification prevents you from seeing whether crane utilisation is efficient.</li></ol><div class="ge-product-note ge-anim"><p><strong>How Gather helps.</strong> Gather's AI reads your site diaries daily and maps progress against your cost-loaded programme, giving you accurate earned value data without manual spreadsheet updates. <a href="https://gatherinsights.com/contact">Book a demo</a> to see it working on a live NEC4 project.</p></div><h2 id="frequently-asked-questions">Frequently Asked Questions</h2><h3>What percentage of a construction project should be preliminaries?</h3><p>Typically 8% to 15% of contract value, depending on project type, complexity, and duration. High-value but short-duration projects (like bridge replacements during possessions) can have prelims above 20% because the fixed costs are spread over less direct work. Simple repetitive projects (like housing estates) tend toward 8 to 10%. The percentage itself doesn't indicate good or bad management. It's the prelims CPI that tells you whether you're controlling costs. </p><h3>Are preliminaries the same as overheads?</h3><p>Not exactly. Preliminaries are site-level overheads, costs that relate directly to the specific project but not to any particular trade package. Head office overheads (directors' salaries, rent, HR, finance) are separate and usually recovered through the fee percentage on NEC4 or the overheads and profit allowance on JCT. Some items blur the line, IT systems, for instance, might be partly site-specific and partly head office. The key distinction: prelims stop when the site closes. </p><h3>How do you claim extended preliminaries on NEC4?</h3><p>Through the compensation event mechanism. If a Client-risk event extends the Completion Date, the Contractor is entitled to the additional prelims cost during the extended period. The assessment uses Defined Cost: actual staff costs, actual plant hire, actual running costs for the additional duration. The target cost (Total of the Prices) is adjusted upwards to reflect this. The critical step is notifying the CE within 8 weeks under clause 61.3. Miss the time bar and you're paying extended prelims from your own pocket. </p><h3>Should preliminaries be in the performance measurement baseline?</h3><p>Yes. Prelims budget is part of <a href="/en/earned-value/definitions/budget-at-completion">BAC</a> and therefore part of the <a href="/en/earned-value/definitions/performance-measurement-baseline">performance measurement baseline</a>. The budget should be time-phased across the programme duration. Because most prelims are monthly costs, the time phasing is typically a flat monthly spread (unlike direct work, which follows the <a href="/en/earned-value/definitions/s-curve">S-curve</a>). That flat profile is another reason prelims CPI is easier to track than people think, the PV baseline is a straight line. </p></article></div>