A contractor offers to recover six weeks for a price. Here is the arithmetic that tells an owner whether the offer is worth taking.
Acceleration decisions are usually made on instinct, because the numbers sit in different places: the contractor quotes a price, the delay costs sit in your own accounts, and nobody puts them side by side. This example puts them on one page for a mid sized residential building being completed for rental.
The situation
A residential building is forecast to complete six weeks late. Part of the delay came from owner instructed changes and part from the contractor own sequencing. The contractor offers to recover the full six weeks through night shifts and an additional finishing crew.
Assumptions (illustrative)
- Contractor acceleration quotation: SAR 480,000 for the full six week recovery.
- Building income once let: SAR 210,000 per month across all units.
- Assumed initial letting take up in the first two months: 60 per cent of units.
- Financing cost during construction: SAR 95,000 per month.
- Supervision and project management fees during construction: SAR 40,000 per month.
- Delay responsibility assessed as two weeks owner caused and four weeks contractor caused.
- All figures are illustrative assumptions used to demonstrate the method.
Step 1: Cost of six weeks of delay to the owner
Financing SAR 95,000 plus fees SAR 40,000 equals SAR 135,000 per month, which over six weeks, or 1.5 months, is SAR 202,500.
This is the cash cost of simply being under construction longer, before any income question.
Step 2: Income lost while the building is not let
At 60 per cent take up, six weeks of delay postpones roughly SAR 210,000 times 0.6 times 1.5, which is SAR 189,000.
Postponed income is not always lost income, because letting simply starts later, but the first period of rent is genuinely gone.
Step 3: Total owner cost of the six week delay
SAR 202,500 plus SAR 189,000 equals SAR 391,500.
Against a quotation of SAR 480,000, paying the full acceleration price to save this delay loses SAR 88,500.
Step 4: Split the recovery by responsibility
Four of the six weeks are the contractor responsibility, so two thirds of the recovery is their obligation. Your share of the six week recovery is two weeks, or one third of SAR 480,000, which is SAR 160,000.
The commercial question is not whether SAR 480,000 is worth paying. It is whether SAR 160,000 is worth paying, since the rest should not be yours.
Step 5: Test the correct offer
Paying SAR 160,000 to recover six weeks worth SAR 391,500 to you leaves a benefit of SAR 231,500.
The same recovery goes from a poor deal to a clearly good one once responsibility is allocated before price is discussed.
Step 6: Consider partial recovery
If the contractor can recover only four weeks for SAR 300,000, your third is SAR 100,000 against owner delay cost of four weeks, roughly SAR 261,000.
Partial recovery is frequently the better buy, because the last weeks of compression are the most expensive and the most damaging to quality.
What changes the answer
- If the building were owner occupied rather than let, the income line disappears and the case for paying weakens sharply.
- If letting take up were slower than assumed, the postponed income matters less and financing dominates.
- If the delay responsibility split were reversed, your share of the recovery cost would double.
- If acceleration causes rework, the cost appears after handover and is rarely recovered from the contractor.
What the numbers tell you
- Determine delay responsibility before you discuss an acceleration price, never after.
- Calculate your own cost per week of delay early, so you can answer an offer the day it arrives.
- Partial recovery is usually cheaper per week than full recovery.
- Keep the quality gates intact whatever the recovery plan says, because rework destroys the arithmetic.
Limits of this example
Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.
Domira designs, builds and manages projects across Saudi Arabia for owners who are based abroad: land appraisal, feasibility, design, construction, handover and asset management under one accountable contract. Send us the plot or the brief and Domira will put the numbers in front of you before you commit.
Frequently Asked Questions
How do I calculate what a construction delay costs me as an owner?
Add the costs that continue while the building is unfinished and the income that arrives later because of it. The continuing costs are typically financing, consultant fees, insurance, security and any rent you pay elsewhere in the meantime. The income side is the revenue the completed asset would have produced, adjusted for how quickly it would realistically have been let or sold.
Should an acceleration agreement be put in writing separately from the contract?
Yes. An acceleration agreement should state the weeks to be recovered, the revised completion date, the price, how payment is triggered by achieving the recovery rather than by attempting it, and that the inspection regime is unchanged. Without a document, you pay for effort instead of results, and the parties later disagree about what was promised. Have the wording reviewed by a licensed adviser before signing.
What if the contractor takes the acceleration payment and still finishes late?
This is why payment should be tied to achievement. Structure it so that part is paid on demonstrating the resources mobilised and the remainder on reaching the agreed revised date, with the existing delay damages position expressly preserved rather than replaced. Also record what happens to the money if only part of the time is recovered, because partial recovery is the most likely outcome.
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