A Pre-Construction Services Agreement is a fixed-fee pre-contract under which a contractor prices the project before the main construction contract is signed. A Letter of Intent authorises a contractor to start defined preliminary work before that contract exists. Both instruments exist because the main contract is not ready to sign. They solve that problem differently.
A contractor’s proposal is sitting on the kitchen table. The architect has recommended signing a Letter of Intent so the contractor can order structural steel while the main construction contract is finalised. The steel will take ten weeks to arrive. The project is already on the critical path. Waiting two more weeks for the contract means the steel arrives two weeks late, the programme slips, and every trade behind it moves with it. The homeowner signs. The architect moves on to the next item. Nobody discusses what happens if the main contract never materialises.
What each instrument exists to do
A Pre-Construction Services Agreement is a fixed-fee pre-contract for defined investigative work. The contractor produces a cost plan, a construction programme, a buildability review, a risk register, trade engagement, and pre-contract documentation. Payment is staged against deliverables, not dates. Duration is four weeks. The fee is charged as a percentage of estimated project value; the typical range on UK residential two-stage tenders is 2–3%. JCT publishes the JCT PCSA standard form. The purpose of the agreement is to do the work of pricing the project (resolving provisional sums, testing buildability, engaging trades) before the client commits to building.
A Letter of Intent is a short pre-contract authorising defined preliminary work. The typical scope is mobilisation, site setup, and ordering long-lead items: structural steel, bespoke joinery, stone, lifts. The LOI should carry a defined cost ceiling and an end date or trigger event. Two types are in common use. A comfort letter signals intention but carries no contractual force. An instruction to proceed is binding for the limited scope it describes. In either form, the LOI does not price the project. It authorises spending on specific items while the project’s overall price is settled through a separate process.
Where the two overlap
Both instruments exist because the main construction contract is not yet ready to sign. Both authorise the contractor to do defined work for a defined fee under a limited contractual relationship. Both are intended to be short-duration. Both are signed before the parties have settled the comprehensive terms of the build.
From the client’s side of the table, both look like the same thing: a document signed before the real contract, paying the contractor to do something useful in the meantime. The language is different. The fee structure is different. The scope is different. But the underlying situation is identical. The main contract is not ready, the project cannot afford to wait, and the parties need a contractual instrument that lets work begin.
This is where the confusion starts. If both instruments address the same situation, the question becomes whether the choice between them matters, and if so, when.
Where the two diverge
The work the PCSA pays for is the work that closes the gap to the main contract. The contractor investigates the project, prices it, tests it, identifies its risks. The investigation produces the information the main contract needs to be signed on terms both parties understand. The PCSA is the instrument that finishes the design-to-contract sequence.
The work the LOI authorises is preliminary build work that happens in parallel to the gap closing through some other process. The contractor orders steel. The site is set up. Deposits are placed on long-lead joinery. These are construction activities, not investigative ones. They assume the main contract will follow.
The difference is structural. The PCSA names the process by which the main contract becomes ready. The LOI does not. If the LOI is being used to buy time while the contract is finalised, the contract is being finalised under what process? In practice, the answer is usually: no formal process. The parties exchange drafts, negotiate terms, resolve scope queries, and do it alongside a live project that is already spending money under the LOI’s cost ceiling. Parties routinely rely on LOIs for far longer than intended. Some projects complete entirely under LOI without a main construction contract ever being signed.
When to use which
A project that needs a Letter of Intent for long-lead orders almost certainly also needs a PCSA. The PCSA should have been signed first. The two instruments answer different questions and the right sequence is PCSA then LOI, not LOI in lieu of PCSA.
Use a PCSA when the main contract scope, design, or price is not yet settled. The PCSA is the instrument that settles them. Use a Letter of Intent when the main contract is settled but execution must start before signature. The steel lead time is ten weeks. The planning condition needs discharging. The holiday season will close the site. The two weeks required to finalise the contract will cost more in programme delay than the LOI’s cost ceiling. In that circumstance, the LOI covers a real gap between a completed investigation and a signed contract.
An LOI without a preceding PCSA is a signal. It means the project is starting construction activities before the cost plan, the risk register, and the buildability review exist. The gap between the quote and the actual cost of the work has not been closed. It will close later, under less controlled conditions, through variations after the main contract is signed. The LOI did not create that problem. It made it possible to start building before the problem was resolved.
How Myrmex handles both
Myrmex defaults to a PCSA. The fee is 2.5–3% of project value. Duration is four weeks. The PCSA is structured around six zones: Scope, Technical, Governance, Financial, Programme, and Actions. Each zone produces named deliverables on a defined timeline, and payment releases against those deliverables.
Myrmex will issue or accept a Letter of Intent only when a PCSA-equivalent investigation has already happened. The cost plan exists. The risk register exists. The design is settled. The only outstanding item is the time required to draft and sign the main contract. In that narrow circumstance, an LOI is a reasonable instrument. It covers a gap of days or weeks between a completed investigation and a signed contract.
In any other circumstance, Myrmex declines to operate under LOI alone. The structural critique in the previous section applies to Myrmex equally. Running a project under LOI without the investigation is the failure mode the firm was built to fix. The broader PCSA structure covers where the agreement sits inside the two-stage tender process and what happens after it.