Assessing loss and expenses claim by prolongation cost

Abstract

Contractor’s claims for loss and expenses have long been a contentious issue on many building contract. Claims are usually resolved during the final account process, but where negotiations fail, they frequently become disputes, with the parties adopting legal route to resolve their differences. Claims to recover prolongation cost arise in a number of contexts and it is importance for the claimant to understand the principles upon which such claims might be evaluated. In valuing the loss and expenses claim by prolongation cost, it is fundamental to prove delay and actual related cost losses arise in an action of damages and failure to prove will not entitle to a claim for damages. The objective of this study is to determine loss and expense claims that is related to prolongation cost by head of loss claims. The head of loss claims include site overheads, head office overhead, loss of profits, interest and financing charges, loss of productivity and cost of preparing the claim. The loss should be measured at the point in time in which the delay event arose, rather than costs incurred at the end of contract. In valuing prolongation costs, the decision in Costain v Haswell therefore provides a useful reminder of the importance of distinguishing costs generated by time and by volume. This study was carried out mainly through documentary analysis of law journals. The study also helps in adding to the knowledge base of the literature on prolongation costs and construction contracts.