Preliminaries in Construction Contracts: What Every Developer Should Know

Danny Ghaebi
Oct 1
3 min read

When it comes to construction project budgeting, preliminaries are one of the most commonly misunderstood — and overlooked — cost components. At OwnerDevelope r, we work with landowners, builders, and investors across Australia to help demystify this often-confusing section of the construction contract.

In this blog, we break down what preliminaries are, what they include, how they affect your bottom line, and why getting them right can mean the difference between profit and loss.

What Are Preliminaries in Construction?

Preliminaries (often shortened to "prelims") are indirect costs that are necessary to get a construction project up and running, but they don’t directly form part of the physical building work.

Unlike material or labour costs tied to specific trades, preliminaries cover:

Site setup and establishment
Project management and administration
Health and safety compliance
Site utilities and access
Temporary works and demobilisation

They are essential to the successful execution of any project, but are often excluded from early estimates — leading to budget blowouts and cash flow stress later on.

Typical Preliminaries You Should Expect

Every project is different, but here are the most common preliminary items included in construction contracts:

1. Site Establishment

Temporary fencing, signage, and security
Site sheds, toilets, and welfare facilities
Access roads and storage areas

2. Project Management & Admin

Project manager and supervisor wages
Reporting systems and communication tools
Site documentation and safety files

3. Utilities and Temporary Services

Power, water, sewerage connections
Internet and phone setup
Generator hire or site lighting

4. Health, Safety & Environmental Compliance

Personal protective equipment (PPE)
First aid stations and fire extinguishers
Dust suppression and noise barriers

5. Demobilisation & Site Handover

Site cleanup
Removal of temporary works
Council compliance documents

How Are Preliminaries Costed?

Most builders price prelims in one of two ways:

As a fixed line-item: Listing every component individually
As a percentage of total build cost: Usually between 5% and 15%, depending on the scope, location, and duration

At OwnerDeveloper, we always recommend breaking down prelims clearly so there’s no ambiguity in quotes or tenders. It ensures transparency and reduces the risk of cost disputes during construction.

Why Preliminaries Matter More Than You Think

✅ Better Cost Control

Missing or underestimated prelims can derail your entire project budget. We’ve seen this time and again with clients who accepted the cheapest quote — only to be hit with surprise variation charges later.

✅ Smoother Project Execution

Without proper site setup, your team can’t operate safely or efficiently. Preliminaries directly affect productivity and workflow.

✅ Improved Risk Management

Many preliminary items relate to legal and safety compliance. Ignoring them can open you up to regulatory penalties and serious delays.

Common Mistakes We See

Treating prelims as a single fixed percentage without project-specific adjustments
Forgetting to account for longer project durations (which increase site overheads)
Overlooking the cost of temporary works or utility upgrades
Underestimating project management needs (especially for complex builds)

How OwnerDeveloper Helps

We provide fixed-price, full-service development support, including accurate feasibility modelling that accounts for all preliminary costs.

Our team has delivered 600+ projects across Australia, and we know exactly how to scope, budget, and control preliminaries from day one.

Whether you’re building a duplex, a townhouse project, or considering a joint venture under the Housing Diversity Code, our team ensures your prelims are: