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THE EVALUATION OF PRELIMINARIES (OR SITE OVERHEADS) IN CONSTRUCTION PROLONGATION CLAIMS

International Construction Law Review

THE EVALUATION OF PRELIMINARIES (OR SITE OVERHEADS) IN CONSTRUCTION PROLONGATION CLAIMS DR FRANCO MASTRANDREA LLB (Hons), M Sc, Ph D, FRICS, FCI Arb, Barrister Introduction Whilst the term “preliminaries” is used extensively in connection with construction contracts in the UK, it has no accepted definition. Its coverage appears broadly to coincide with that of “site overheads” as that term is used in the US. 1 Nevertheless, “preliminaries” are commonly understood to denote a bundle of resources of diverse attributes and characteristics. 2 Thus, the Construction Project Information Committee, responsible for providing best practice guidance on the content, form and preparation of construction production information, has proposed the following definition for preliminaries: “Preliminary and general information and information relating to the Works as a whole; items for the Contractor’s general costs; provisional sums and other items for work by others or subject to later instruction.” Traditionally, a contractor makes allowance in his pricing of preliminaries for the provision of resources: to be used in common, as between different trades or organisations employed in connection with the works, 3 such as general atten- 1 See, in England, J D Wetherspoon plc v. The Commissioners for Her Majesty’s Revenues & Customs [2007] UKSPC SPC00657, in which the two terms were treated as equivalent. Special Commissioner Walters said: “Costs concerned with the works as a whole are preliminaries being commonly referred to as the contractor’s site-related overheads.” 2 The RICS “Order of Cost Estimating and Elemental Cost Planning”, effective from 1 May 2009, and intended to bring a measure of uniformity into the manner by which quantity surveyors approach their estimating and cost planning functions defines “main contractor’s preliminaries” as including: “the main contractor’s costs associated with management and staff, site establishment, temporary services, security, safety and environmental protection, control and protection, common user mechanical plant, common user temporary works, the maintenance of site records, completion and post-completion requirements, cleaning, fees and charges, sites services and insurances, bonds, guarantees and warranties.” 3 Thus, in the J D Wetherspoon case, n. 1, above, Special Commissioner Walters said: “Preliminaries are global costs covering several different items which are not readily attributable to specific items … Preliminaries generally refers to the building contractor’s necessary costs which are not usually tangibly reflected in the finished works as opposed to costs directly related to the quantity of items of work, i.e. materials, tradesmen and site labour, tools and small plant.” He also held that where allocation of “global” costs of this sort is difficult, an apportionment approach may be acceptable, invoking BP Refinery (Kwinana) Ltd v. Federal Commissioners of Taxation [1961] ALR 52. Pt 4] Preliminaries in Construction Prolongation Claims 429

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