Preliminary Costs and Contractors Management/Overhead Costs

When you receive your major works breakdown of costs you will see that you are
being charged 20.25% for preliminary fees and 8% for Contractors Management and
Overhead Costs.
Explanation of Costs
As well as the cost of the actual work being undertaken, there will be other costs
incurred when managing a major works contract. These costs relate to the on site
supervision, contractors overheads and the general management of the contract.
These costs are charged back to leaseholders under two headings, preliminary costs
and the contractors management overheads.
Preliminaries include for site management & supervision, site offices, transport &
parking costs, cleaning, communications, surveying and technical staff costs and
health and safety.
The contractors management overheads include a proportion of the companys
central overheads such as head office and staff costs, which are not included in the
preliminaries and an amount for profit.

Partners Review of Costs
Following Partners application to the Leasehold Valuation Tribunal, we have
reviewed all costs charged to leaseholders and have carried out a detailed analysis
of all preliminary costs incurred in our Round 1 PFI contract. We have now been able
to do a detailed financial reconciliation of the works carried out that are rechargeable
to leaseholders. These are works to the external fabric of the buildings and
communal parts. We have done a similar reconciliation of all preliminary costs and
have stripped our costs purely associated with tenant only works.
One key component of the preliminary costs is our staff costs. Our contract covers a
large area of Islington and is dived up into zones. Each zone needs a specialist team
of technical staff to mange the works. A time analysis exercise has been carried out
by all staff to ascertain the amount of time spent on dealing with the works carried out
to the external fabric of the buildings and the communal parts, namely the
rechargeable works.
This exercise has allowed us to calculate an accurate, fair and reasonable
methodology for calculating the level of preliminary costs rechargeable to
leaseholders and from this to calculate a percentage recharge when compared to the
value of rechargeable works carried out in the Round 1 PFI contract based on actual
costs.

Use of an Independent Expert
Our independent expert who is a chartered quantity surveyor was asked to review
both the methodology and percentage of preliminary costs charged and to review the
level of management overheads we recharge to leaseholders. He has also looked at
costs charged in similar schemes across London and concluded that 8% is a fair and
reasonable percentage to charge for overheads & profits.
During the review period we worked with PFI LAG (leaseholder action group) the
group which was representing leaseholders. They appointed their own expert who
was also a quantity surveyor. He reviewed the costs for the leaseholder group and
Partners paid his fees during the review.
The two experts met and discussed the charges and both agreed a statement of
costs, which they concluded would be a reasonable charge for leaseholders. The
percentage figures that are being recharged are ones that all parties involved
consider are reasonable figures to recharge. We would also like to thank the action
group for working with us to conclude this review of costs. Individual leaseholders still
have the right to challenge costs. We send out a statement of rights with all service
charge invoices. You can also view this document on our website under leaseholder
information.

Costs Charged for Major Works.
Preliminaries: - 20.25%
Management Overheads: - 8%
Total =28.25%

We are now part way through the Round 2 works programme and will be reviewing
preliminary costs and the contractors management overheads as works progress.
Please contact the leasehold team if you would like to discuss these costs when you
receive your major works bill.

Leasehold Team
Partners