WHEN THE PRELIMINARIES AMOUNT IS TO BE ADJUSTED DUE TO EMPLOYER DELAYS, SHOULD THE EVALUATION RELATE TO THE PERIOD WHEN THE DELAY OCCURS OR TO THE OVERRUN AT THE END OF THE CONSTRUCTION PERIOD?

It is common practice for decisions concerning the award of an extension of time to be made before considering the matter of prolongation costs. Once an extension of time has been granted, the evaluation of the additional prolongation costs is often related to the period between the contract completion date and the extended completion date. Is this the correct method?

This is particularly relevant when making adjustments to Preliminaries under the provisions of the JBCC Series 2000 Principal Building Agreement and when the Contractor has selected Alternative B as his preferred method of adjustment.

Alternative B requires the Contractor to provide a detailed breakdown of his Preliminaries giving full particulars of administrative, supervisory and other personnel, plant, transport and other resources and charges. The breakdown shall show the periods to which the individual items relate.

The intention of most construction contracts is for the Contractor to be reimbursed the additional cost which results from Employer delays. This involves a comparison between the actual costs incurred and what the cost would have been had no delay occurred. Where, for example, time is lost awaiting details which causes a four-week delay to the critical path, evaluating the prolongation costs associated with the extra four weeks on site, following the revised contract completion date, would obviously not produce the correct answer. A more accurate evaluation would be achieved by reference to the costs incurred during the four weeks when the information was late in arriving.

The Delay and Disruption Protocol, published by The Society of Construction Law, with regard to this matter, states:

‘Arguments commonly arise as to the time when recoverable prolongation compensation is to be assessed: is it to be assessed by reference to the period when the Employer Delay occurred (when the daily or weekly amount of expenditure and therefore compensation may be high) or by reference to the extended period at the end of the contract (when the amount of compensation may be much lower)? The answer to this question is that the period to be evaluated is that in which the effect of the Employer Event Risk was felt.'

It is clearly intended that, once it is established that additional payment is due for prolongation resulting from employer delays, the evaluation should relate to the period when the effect of the delay occurs and not to the overrun period at the end of the contract.

BACK TO LEGAL & CONTRACTUAL FAQS