Prolongation costs – what period do I calculate and claim for?
In what period do I claim my prolongation costs for? This is a common but simple issue that we come across. But if you get it wrong, it can mean that causation has not been proven and your entitlement being substantially reduced or even rejected.
There are two opportunities when prolongation costs can be calculated – either at the end of the project or at the time the delay was felt.
The vast majority of construction claims that we get involved in, or which we are asked to defend, ascertain the prolongation costs incurred at the end of the project. That is to say the contractor typically calculates the prolongation costs incurred between two dates; the original contract completion date and the actual completion date, and then proceeds to claim the actual cost incurred in this period or even worse uses contract allowances or budgets to calculate an estimated weekly run rate. The logic is simple, this is the period when we did not plan to be on site and therefore we should claim this cost.
This is incorrect.
The cost that should be claimed is the actual time related cost that was incurred during the actual period of delay.
Say for example, in February (month two) of the project, you suffer a delay of 20 days (say whilst still in the ground) and you receive an extension of time to defer the completion date by 20 days (say to July). The delay is felt in February, not July, and you should capture and calculate the additional costs incurred in February (as no progress was made in this period, the period of delay).
To reiterate the point, if the completion of the final documentation activity (which is usually one of the last activities to be complete on any project) is now delayed and carried out in July, then by adopting the first calculation strategy above, the Contractor would typically claim the full cost of completing final documentation in July in his prolongation claim. But this activity and cost is not affected at all by the delays suffered in the ground, it is merely deferred to start in July, so how can you claim for the cost for completing the final documentation again, when it is not affected at all by the delay event in question!
Simple, in theory! But in practice it is much more difficult, but that’s for another time.