Claims for additional preliminaries costs due to project prolongation

Abstract

Claims for additional preliminaries cost due to project prolongation is actually a part of loss and/or expense claim. The principle governing this claim was established in Hadley v Baxendale (1854) which provides that the party who suffers direct and reasonably foreseeable costs entitled to damages. This principle has been adopted in most of the standard forms of contract in Malaysia. As required by the contractual provisions such as in the PWD 203A (Rev. 2010/1), PAM Contract 2006, CIDB Form 2000 and IEM Form 1989, the contractor?s entitlement to loss and/or expense is limited to selected delaying events. In addition, the submission of claim must be made in specific time period as provided in the contract. There are cases when everything else was in order, the contractor was denied a claim due to his own failure to abide by the procedural requirement for submission of claim. The heads of claim under the loss and/or expense generally can be grouped under seven categories i.e. additional expenditure, interest and financing charges, loss of productivity, inflationary cost increase of materials and labour, site overheads or preliminaries, offsite or head office overheads and loss of profit. The objective of this research is to determine the preliminaries items that are considered and recommended for payment by contract administrators in claims for additional prolongation costs in the Malaysian construction industry. As a general guide, a possible list of claimable preliminaries items established from this study may be useful to contractors in their submission of loss and/or expense claims due to project prolongation in the future. It is also beneficial to contract administrators to learn how others evaluate the claims and thus, able to improve themselves on the way loss and/or expense being evaluated as compared to the settled law in this regard.