Claiming Prolongation Costs when there is no Entitlement to an Extension of Time
It is generally accepted that, in a situation where a contractor is entitled to an extension of time, he is also entitled to claim for time-related costs for site overheads and head office running costs for the additional time that he was obliged to remain on site. This is based upon a fundamental principle of law, that a party who has been prevented from performing his obligations by the other party is entitled to compensation to put him back into the position that he would have been in, had the act of prevention not occurred. In construction terms, this usually means the reimbursement of the contractor’s costs for providing site management, site establishment, plant and equipment, insurances, additional financing costs and the like and head office costs, which are often referred to as prolongation costs for the extended time.
Are there situations, however, that a contractor may legitimately claim for the payment of costs when an extension of time is not warranted? Well, yes there are. Consider the following example.
The contractor is constructing a high-rise building and has a tower crane on site, which his programme shows is to be removed on a certain date. The contractor however receives a variation order to change the specification of the air-conditioning chiller, which is located on the roof of the building and needs to be hoisted into position by the tower crane. The change to the chiller requires modifications to be made at the factory where the chiller is being manufactured and this will delay the delivery of the chiller to a date later than the date by which the contractor had planned to remove the crane.
The contractor will therefore incur additional costs in hiring (or depreciation costs of) the tower crane, the crane operator and safety checks and maintenance, from the time that he should have been able to remove the crane, to the date that he was able to hoist the chiller into position and finally remove the crane.
There is therefore a direct linkage of the cause, i.e. the variation, to the effect, which is the additional time-related costs for the tower crane.
The costs here could either be claimed with the variation for the chiller or submitted as a discrete claim.
This subject is covered by our training partner’s Construction Claims Distance Learning Course. If you have found this paper useful and informative, you can find further details about the course on their website at www.constructionclaimsclass.com.
This blog was authored by ICCP Executive Officer, Andy Hewitt.