The client has required that Preliminaries are highlighted as a separate section in the Tender, including all time related prelims, on and off site. Due to the nature of the works a large proportion of the prelims related to off site supervision and management. This will be separately built up in the Tender but will not be valued in the schedule of cost components as the office location os not included in the working areas. Does anyone have any suggestions how to resolve this issue and recover ALL prelim costs for Compensation Events in the same way as the Tender is built up.
Firstly, as you are only interested in this question for compensation events, I am assuming that it is is a priced based contract : either options A or B. Secondly, I am assuming that the “off-Site supervision and management” is being carried out at your own offices or manufacturing / installation yard. In which case, the most common thing to do is to ‘carve out’ some areas from these locations for use ONLY on this contract. These can then be classified as part of the Working Areas and stated as such in Contract Data Part 2.
This is sometimes not possible, either due to (a) space restrictions in the office or (b) a manufacturing process is too intermingled with other contracts, so cannot have a specific area allocated to it.
For (a), this means you have to have a larger direct fee percentage, although in practice you could reduce this by having a higher percentage for People overheads. In reality, especially post award to avoid unnecessary cost in setting up a seperate Working Area at HO, a grown up conversation is had to determine what level of justification to persuade the PM that resources allocated to the contract are being used on the contract. Remember though that CEs should ideally be based on forecasts.
For (b) your costs are covered by Heading 5 : Manufacture and Fabriaction in the Shorter Schedule of Cost Components, although this is a very high level statement to say your costs are covered. In practice, the client is doing exactly the right thing by asking you to break down your prelims at tender so that there is transparency over these costs (although having read your question again, you are only asking about offices).