Most of a project's cost is decided before construction starts. By the time drawings go to tender, the structural system, the building envelope, the mechanical approach and the phasing are already fixed. Bringing a contractor in during design, to price the options, test constructability and plan the build, gives the owner a chance to influence those decisions while they're still cheap to change.
That's the promise of preconstruction services, also called early contractor involvement. The risk is that the contractor who helped shape the design ends up as the only realistic choice to build it, at a price the owner has little power to challenge. This guide explains what preconstruction services include, how to procure them, how they're paid for and how to keep your options open.
What preconstruction services include
The scope varies by project, but a solid preconstruction agreement usually covers:
- Cost estimating at each design stage, so the owner knows whether the design is tracking to budget before it's too late to change course.
- Constructability review of drawings as they develop, looking for details that are hard or expensive to build, missing information and coordination clashes.
- Schedule and phasing, including a preliminary construction schedule, site logistics and, for occupied buildings, a phasing plan that keeps operations running.
- Procurement strategy, including how the work will be split into trade packages and when each needs to be tendered.
- Long-lead items, identifying equipment and materials that need to be ordered early, such as switchgear, elevators or custom curtain wall.
- Market input, sounding out trades on availability, pricing trends and alternative products.
- Risk identification, feeding construction risks into the owner's risk register and contingency planning.
- Value engineering, proposing alternatives that reduce cost without losing function.
New Zealand's government procurement guidance on early contractor involvement describes the contractor's role in similar terms: buildability, value engineering, supply chain input and an early view on whether the budget is realistic.
Ways to procure preconstruction services
In Canada, owners typically buy preconstruction services in one of four ways.
Construction management. Under the CCDC construction management forms, the construction manager joins during design. The 2025 editions of CCDC 5A and 5B separate preconstruction fees from construction-phase fees, and CCDC 5B now defines preconstruction services separately from construction services, according to Gowling WLG and BLG. Our guide to CM at risk vs CM for fee explains the two models.
Progressive design-build. Under the new CCDC 32-2026, the design-builder provides design and preconstruction services during a project development phase, then proposes a stipulated price. See our guide to progressive design-build and IPD.
Two-stage tendering. The owner selects a contractor in a first stage on qualifications, methodology and certain priced elements, signs a preconstruction services agreement, and then negotiates the construction price in a second stage, usually on an open-book basis.
Stand-alone preconstruction agreement. The owner pays a contractor or construction manager for preconstruction advice only, with no commitment to award construction. This keeps the most freedom, but it's harder to attract strong contractors without a realistic prospect of the main contract.
How preconstruction is paid for
Preconstruction is professional work and should be paid for. Free preconstruction isn't free: the cost is recovered later, usually in the construction price, where it's harder to see. Common fee structures are:
- Lump sum, for a defined scope of preconstruction services. Simple to manage, but the scope needs to be clear, including how many estimates and reviews are included.
- Time-based rates, paid for hours actually worked, ideally with an upset limit. WeirFoulds suggests owners consider upset limits on time-based rates in the CCDC 32 development phase.
- Percentage of the construction cost estimate. The OAA's summary of the 2010 CCDC 5B lists this alongside fixed amounts and time-based rates as options for the services fee. A percentage fee rises as the estimate rises, which is the opposite of the incentive most owners want during design.
Whichever structure you choose, the agreement should say what happens to the work product. The New Zealand guidance notes that paying for preconstruction services even when the contractor isn't awarded the construction contract helps avoid disputes over intellectual property. The UK's Designing Buildings reference adds that the agreement should deal with any design work the contractor does, and what happens to its design liability if it isn't appointed for construction.
The lock-in problem
Once a contractor has spent months on the design team, the owner's leverage changes. Designing Buildings notes that the client loses some negotiating leverage in second-stage negotiations because the contractor is already embedded in the team and competitors may lose interest. Re-tendering at that point costs time and can mean losing the knowledge the contractor has built up.
The trade-off isn't all negative. The same source notes that two-stage tender prices may start higher than single-stage tenders, but the final account often has fewer variations and claims. The goal is to keep the benefits of early involvement while keeping enough competitive pressure on price.
The protections that work best are agreed before preconstruction starts:
- Price what you can at selection. The New Zealand guidance has first-stage tenders include fixed preliminaries, meaning site running costs, and a fixed margin for overheads and profit. Lock in the construction fee and general conditions rates up front, and the second-stage negotiation narrows to the cost of the work itself.
- Tender the trades. Have the contractor competitively tender trade packages on an open-book basis, with the owner attending bid openings and approving awards. Most of the construction cost is trade cost, so most of the price stays competitive.
- Keep an independent estimate. A cost consultant working for the owner should estimate the project at each design stage, separately from the contractor.
- Set award conditions. The New Zealand guidance makes construction award conditional on satisfactory preconstruction performance, full open-book cost transparency and an agreed price within a cost ceiling.
- Keep a real exit. The agreement should let the owner decline to proceed and go back to the market, with the work product paid for and usable. CCDC 32 builds this in by letting either party terminate before the final price is accepted. Under CCDC 5B-2025, BLG notes, owner termination for convenience during preconstruction carries a break fee, which owners should understand before signing.
Two estimates at every gate
The most useful control during preconstruction is simple: compare the contractor's estimate with an independent one at every design milestone, and against the budget.
View the data
| Design stage | Contractor | Independent | Gap |
|---|---|---|---|
| Schematic | $32.4M | $31.6M | $0.8M |
| Design dev. | $31.2M | $30.9M | $0.3M |
| 50% CDs | $30.6M | $30.2M | $0.4M |
| 95% CDs | $30.3M | $29.8M | $0.5M |
When the two estimates converge on or under budget, the owner has evidence that the eventual price is fair. When they diverge, the gap tells you where to look: quantities, unit rates, allowances or risk. On programs we've supported, the conversations triggered by those gaps were worth more than either estimate on its own. Our guide to construction contingency covers how to carry the risk that remains.
Selecting the right contractor for preconstruction
Selection for preconstruction is different from a hard-bid tender. You're hiring advice first and a builder second, so the people matter as much as the firm. Ask who will actually do the estimating and constructability reviews, and interview them. Ask for examples of preconstruction reports from past projects, not just a list of completed buildings. Check how the firm's estimates on earlier projects compared with the final cost.
The priced elements of the submission deserve as much scrutiny as the qualifications. A low preconstruction fee paired with a high construction fee, or general conditions rates well above market, can cost far more than it saves. Score the commercial terms as a package. Our guide to prequalifying contractors in Ontario covers the financial and safety checks that still apply.
When early involvement isn't worth it
Not every project needs a contractor at the design table. A small, simple fit-out with standard details and a flexible schedule may get better value from a conventional tender of finished drawings, with an independent cost consultant providing estimates during design. Early involvement pays off when the design choices are significant, the site or phasing is complex, the market for key trades is tight, or long-lead equipment drives the schedule.
What owners should do
- Bring the contractor in early enough to matter. Preconstruction input is most valuable during schematic design and design development, while major systems can still change.
- Write a clear scope and pay for it. List the estimates, reviews and deliverables you expect, and use a lump sum or capped time-based fee.
- Lock in fee and general conditions at selection. Then only the cost of the work is left to negotiate.
- Run an independent estimate in parallel. Reconcile the two at every gate and ask about every large gap.
- Protect the exit. Make sure you can walk away, re-tender and use the work you've paid for. Get legal advice on the agreement before signing.
The bottom line
Early contractor involvement can save money where it counts, in the design decisions that set most of the cost. It also hands the contractor a strong negotiating position if the owner isn't careful. Pay for preconstruction properly, price what you can up front, keep an independent check on cost and preserve a real option to walk away. Do that, and you get the contractor's knowledge without giving up your leverage.
Planning to bring a contractor in during design? Book a 30-minute call with Benjamin R. Consulting.
Sources: New Zealand Government Procurement, Early Contractor Involvement, Construction Procurement Guidelines (October 2019); Designing Buildings, Pre-construction services agreement (PCSA); Gowling WLG, Updates to the 2025 CCDC construction management contracts; BLG, 2025 CCDC construction contract updates; Ontario Association of Architects, Practice Tip PT.23.4: CCDC 5B-2010; WeirFoulds via Mondaq, Introducing the new CCDC 32-2026 progressive design-build contract. The estimate comparison is illustrative. This article is general information, not legal advice. Get legal advice on your contract and specific circumstances.