Finalise Prelims & Pricing Schedule

Section 1

Purpose

Note on JCT editions: JCT has published the 2024 Edition. This guidance cites JCT SBC/Q 2016 clause references; the commercial and payment mechanisms are substantively unchanged in the 2024 edition, but specific clause references should be verified against the contract edition in use on any given project.

The contractor's preliminaries submission and pricing schedule require careful review and finalisation before the contract is executed. Preliminaries represent the contractor's allowances for site establishment, management, temporary works, plant, welfare, insurance and time-related costs — typically 12–18% of the measured works value. Understanding the contractor's preliminaries build-up is essential for the QS: it reveals the contractor's programming assumptions, management team quality, and the fixed/time-related split that governs how preliminaries are valued in the event of programme extensions or contractor delay.

This note sits immediately before Contract Document Preparation (GN-TD-12) because the pricing schedule — whether a Bill of Quantities, Contract Sum Analysis or Activity Schedule — must be fully reviewed, agreed and finalised before the contract is executed. Any qualifications, provisional entries or discrepancies in the pricing document must be resolved at this stage, as the pricing document forms a contract document and cannot be unilaterally amended post-execution without a formal change instruction. Finalising the pricing schedule first ensures that the contract sum, preliminaries breakdown and pricing document are complete and consistent before the contract documents are assembled.

NRM 2 (2nd edition, 2021) provides the standard framework for preliminaries items. RICS Cash Flow Forecasting (2nd edition, 2024) confirms that the contractor's preliminaries split (fixed vs time-related) is a key input to the Stage 5 cash flow forecast and interim payment assessment.

Section 2

Key Principles

NRM 2 (2nd edition, 2021), Section 1 — Preliminaries: defines the structure for BQ preliminaries — project/site overview, employer's requirements, main contractor's cost items (fixed charges, time-related charges, method-related charges).
RICS Cash Flow Forecasting (2nd edition, 2024), Section 3 — Practical Application: the contractor's fixed/time-related preliminaries split is used to model how preliminary costs are phased in the cash flow forecast; fixed charges are front-loaded; time-related charges are spread over the programme.
RICS Tendering Strategies (1st edition, 2015), Section 3.10: overheads and profit should be submitted as separate percentages (not combined); the tender analysis should examine whether OH&P percentages are reasonable relative to current market conditions.
JCT SBC/Q 2016, Schedule 2 — Contractor's Designed Portion: where a CDP is included, the pricing schedule must include the CDP design fee and the CDP construction cost as separately identifiable items.
Construction (Design and Management) Regulations 2015: the contractor's preliminaries must include adequate allowance for CDM compliance — welfare facilities, health and safety management, notification of HSE (F10) — as specified in the pre-construction information.

Section 3

Practical Application

Step 1

Review the contractor's preliminaries submission in detail. Confirm that the following are included and priced: site management (site manager, project manager, foreman); temporary works (hoarding, scaffolding, temporary drainage, temporary power); welfare (canteen, toilets, drying rooms); plant (tower crane, hoists, pumps); site security; waste management; CDM compliance; and head office overheads.

Step 2

Confirm the fixed/time-related split of the contractor's preliminaries. Fixed charges (site establishment, tower crane erection/dismantling, hoarding) should be distinguished from time-related charges (site management per week, tower crane hire per week, site security per week). This split is critical for interim payment assessment and for valuing variations that affect the programme.

Step 3

Review the contractor's overheads and profit percentages. RICS Tendering Strategies confirms these should be stated separately. Current market OH&P for building contractors typically ranges from 3–8% for overheads and 2–5% for profit depending on market conditions, project type and competition level. Unusually low OH&P may indicate a distressed contractor or front-end loading in the measured rates.

Step 4

Check the pricing schedule for front-end loading: review whether high-value early activities (excavation, foundations, frame) appear to be priced above market rates while later activities (fit-out, finishes) appear below. Front-end loading is not automatically disqualifying but should be noted in the tender report and monitored at interim valuations.

Step 5

Confirm that the pricing schedule correctly reflects all addenda issued during the tender period. Any item covered by an addendum that is not reflected in the pricing schedule is a tender irregularity requiring clarification before contract execution.

Step 6

Confirm daywork percentages: labour, materials and plant daywork percentage uplifts on prime cost should be reviewed against RICS Schedule of Basic Plant Charges and current market rates. Unusually high or low daywork percentages will affect the cost of future variations priced on a daywork basis.

Step 7

Review the contractor's provisional sum allowances and PC sums within the pricing schedule. Confirm that provisional sums have been priced at the instructed amount plus the contractor's OH&P uplift. Confirm that PC sum allowances match the specified supply-only values in the Employer's Requirements or BQ preambles.

Step 8

Finalise the pricing schedule with the preferred tenderer: resolve all outstanding queries, agree any arithmetic corrections, and confirm the schedule is accurate and complete. Prepare a final summary of the contract sum build-up (measured works + preliminaries + OH&P + provisional sums + PC sums + inflation = contract sum) and confirm it is ready to be incorporated into the contract documents as part of the GN-TD-12 process.

Section 4

Common Mistakes to Avoid

Not reviewing the fixed/time-related preliminaries split before contract execution — without this information, the QS cannot correctly value preliminary costs in interim payment certificates or in the event of an extension of time.
Accepting combined overheads and profit as a single percentage — combined OH&P prevents the QS from assessing the contractor's profit margin independently; RICS Tendering Strategies (2015) recommends they are stated separately.
Overlooking front-end loading in the pricing schedule — front-end loading inflates early interim payments and effectively provides the contractor with an advance payment that is not secured by retention.
Not confirming addendum compliance in the pricing schedule — missing addendum items will result in disputes when those items arise for payment during the construction phase.
Proceeding to contract document assembly (GN-TD-12) before the pricing schedule is fully finalised and agreed — any discrepancy discovered post-execution cannot be corrected without a formal change instruction.

Section 5

APC Competency & Quick Reference

APC Competencies: Cost Management (L2) | Commercial Management (L2) | Procurement & Tendering (L1) | Contract Administration (L1)

What is the typical range for contractor's preliminaries as a percentage of measured works?

Preliminaries typically represent 12–18% of measured works for standard building contracts. The range reflects project complexity, location, contract period, and the nature of site constraints. Major infrastructure or complex refurbishment projects may exceed 20%. Unusually low preliminaries (below 10%) may indicate inadequate site management allowances or significant risks being underpriced.

What is the significance of the fixed/time-related preliminaries split?

Fixed preliminary costs (crane erection, hoarding, site establishment) are incurred at the start and end of the contract regardless of duration. Time-related costs (site management, welfare, crane hire) are incurred weekly throughout the programme. The split determines: (i) how preliminary costs are phased in the cash flow; (ii) how preliminaries are valued in interim certificates; (iii) how preliminary costs are adjusted if the programme is extended by employer-risk events.

What is front-end loading and why is it a concern?

Front-end loading is the practice of pricing early, high-volume activities above market rates and later activities below, to improve the contractor's early cash flow. It is not prohibited but creates risk: the employer overpays early in the contract, and if the contractor becomes insolvent mid-project, the employer will have paid more than the value of completed work. The QS should identify front-end loading in the tender analysis and consider its implications for the payment mechanism.

Section 6

Prelims & Pricing Schedule Checklist

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Contractor's preliminaries reviewed in detail (management, temp works, welfare, plant, CDM)

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Fixed/time-related split of preliminaries confirmed and documented

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Overheads and profit stated as separate percentages (not combined); assessed against market norms

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Pricing schedule reviewed for front-end loading; noted in tender report if identified

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Addendum compliance confirmed in pricing schedule

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Daywork percentages (labour, materials, plant) reviewed and accepted

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Provisional sum allowances confirmed at instructed amounts plus OH&P

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PC sum allowances confirmed against specified supply-only values

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Final contract sum build-up prepared and agreed (measured + prelims + OH&P + prov sums + PC sums + inflation)

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Pricing schedule finalised, signed/initialled, and ready for inclusion in contract documents (GN-TD-12)

Section 7

CPD Learning Outcomes

Review a contractor's preliminaries submission, confirm the fixed/time-related split, and explain how this split affects interim payment assessment and the valuation of extensions of time.
Identify front-end loading in a contractor's pricing schedule and advise the client on its implications for payment security and contractor insolvency risk.
Confirm that overheads, profit, daywork percentages and provisional sum/PC sum allowances in the pricing schedule are reasonable, correctly structured, and fully agreed before the pricing schedule is incorporated into the contract documents.

Section 8