1. Records, Records, Records!

Never truer than when you are seeking to support a prolongation cost claim. Every Riyal or Dirham must be supported in the form of invoices, payment receipts, salary slips, bank statements, delivery notes, etc. etc. etc. Be prepared to be quizzed on every single element of your claim. If you can’t prove it, you will lose it!

2. Demonstrate Contractual Entitlement.

Many claims fail for the simple reason that the stated events causing the additional cost, don’t give rise to an entitlement under the Contract or the Law. Investigate, Evaluate, Draft the story.

3. Address compliance with Notice provisions.

The Engineer’s first call will be a rejection of the claim due to failure to notify. Address this issue head on and spell out how compliance has been achieved – or, why it is not necessary. Check out our previous commentary entitled “Claims Notices – Fact & Fiction”.

4. Include only time related cost / loss incurred at the actual time that the critical delay occurred.

The claimant is entitled to claim actual costs incurred during the period of critical delay, not for the costs incurred at the end of the project during the extended duration.

5. Exclude any Capital costs.

Typically – rents, insurance, utility, leases etc are compensable, however purchase costs of equipment, vehicles, accommodation or materials are not!

6. Exclude any Task related costs.

They are only compensable in rare circumstances e.g. if hire duration is extended or inflation comes into effect. It is also possible to claim for reduced productivity if this is a result of the delay event (that will be a separate Claim).

7. Exclude claims for profit.

The claim should restore the claimant to its original position and reimburse the costs incurred due to the compensable event – it does not allow profits to be claimed for, although there may be scope for a loss of opportunity claim..

8. Include claims for head office overhead cost contribution.

Whilst using Emden, Eichleay or Hudson’s various formulae will give you headline grabbing claim values – not once in 25 years of Claims work have I seen an Employer accept this approach! There really is no other way than to quantify the cost or fully substantiate a specific “loss of opportunity” to recover those costs.

9. Include a wide variety of finance costs.

Costs incurred due to interest on late payments, FX losses, late payment penalties (from suppliers / subcontractors), insurances, factoring costs, increased borrowing costs, inflation (contentious!) and other actual finance related costs may all be recoverable. In this regard, the earlier you make and properly substantiate your claim the sooner interest will start accruing!

10. Consider including all other unrecovered costs in other claims or variations.

If they aren’t prolongation costs then they may be costs incurred due to: Disruption, Acceleration, Thickening, Unforseen Conditions or simply costs that should be included in the value of a Variation. There are many ways to get where you need to be.

When it comes to the crunch, use an Experienced Claims Analyst. Don’t take a gamble on whether your team know how to deliver points 1 to 10 above. Employ or appoint a Consultant who has a proven track record in securing prolongation costs. This decision can make you/ save you enormous sums of money.

This article was originally written and published on the internet by DBS Consult on 22/05/17.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

BDAS specialise in: providing contract advice, resolving construction disputes, managing construction claims & adjudications and will give you competitive, independent advice tailored to your specific construction problems.

If you could benefit from this please call Jon now on 07795 231 231 or email: Jon@BDASweb.com