Building Up a Prolongation Cost: The Heads of Claim, Line by Line

What a contractor can actually recover for being on site longer, how each head of claim is proved, and the lines that get disallowed almost every time.

Prolongation cost is the additional time related cost of remaining on site for an extended period. It is not a percentage of anything and it is not the difference between tender and outturn. It is a build up of specific costs actually incurred during a specific period, each proved by its own evidence, and the strength of the claim lies almost entirely in that discipline.

What this number does and does not include

This covers the time related cost of a period of delay for which entitlement has been established. It does not cover disruption, which is the cost of reduced productivity and is proved differently, nor acceleration, which is the cost of recovering time. It assumes an extension of time has been granted or is accepted for the period claimed, because quantifying cost for a period with no established entitlement puts the quantum before the question. Contract wording governs what is recoverable and the drafting changes between forms and over time, so the heads below are a framework to test against your own clauses with a licensed adviser rather than a list of guaranteed entitlements.

Site establishment and preliminaries

The running cost of the site during the extended period: offices, stores, hoarding, temporary services, welfare, security, cleaning and small plant retained for general use. This is usually the largest head and the most straightforward, because the cost is incurred by the calendar and the evidence is in the invoices and hire records.

• Pushes it up: A large and heavily serviced site establishment, a long extension period, and facilities on hire rather than owned.
• Brings it down: Demobilising facilities not needed during the delay period, and owning rather than hiring where the asset has other uses.
• How to control it: Base the claim on the actual cost in the delay period from invoices and hire returns, not on the tendered preliminaries rate, and show both so the comparison is visible.

Site management and supervision

The time of the staff who had to remain on site: project manager, engineers, surveyor, planner, safety officer, foremen and administrative support. Recovery normally depends on showing that these people were genuinely retained on this project during the period and could not be deployed elsewhere.

• Pushes it up: A full staff establishment retained through a long delay, and senior staff whose cost per month is high.
• Brings it down: Redeploying staff to other projects during the delay and claiming only the time actually spent.
• How to control it: Support the claim with timesheets or an allocation record showing who was on the project each month, and claim actual cost rather than a notional rate.

Plant and equipment retained on site

Cranes, hoists, scaffolding, access equipment and major plant held through the delay period. Hired plant is evidenced by hire invoices. Owned plant is harder, because the claim is for the loss of use of an asset rather than an invoice, and the basis of valuation has to be explained and justified.

• Pushes it up: A tower crane or similar high cost item standing through the period, and long term hire agreements that cannot be suspended.
• Brings it down: Off hiring or releasing plant during the delay where it is genuinely not needed, and negotiating standing rates with the hire company.
• How to control it: Separate hired from owned plant, evidence hired plant by invoice, and state the basis of valuation for owned plant clearly rather than applying a list rate.

Subcontractor time related costs

Where subcontractors incur their own prolongation cost and claim it up the chain, those amounts can form part of the main contractor claim if they have been properly assessed and are payable. Passing up an unassessed subcontractor claim is one of the quickest ways to have the whole head disallowed.

• Pushes it up: Many packages affected simultaneously, and subcontracts with standing time provisions.
• Brings it down: Assessing each subcontract claim on its merits before passing it up, and agreeing standing arrangements early in the delay.
• How to control it: Assess every subcontractor claim on the same evidential basis you expect to be applied to your own, and show the assessment in the submission.

Head office overhead contribution

The contention that the extended period absorbed head office resources that would otherwise have supported other work. This is among the most contested heads, because it requires evidence rather than a formula: either the actual additional overhead cost, or evidence that the resource was genuinely unavailable for other turnover.

• Pushes it up: A long delay on a contract that represents a large share of the company turnover.
• Brings it down: A short delay, or a period in which the company took on other work without constraint.
• How to control it: Decide whether you are claiming actual additional overhead or a contribution lost, evidence it accordingly, and expect the formula based approaches to be challenged.

Financing cost of the delay

The cost of funding the works for longer, including interest on facilities drawn to cover the extended period and the financing effect of retention held for longer. Whether this is recoverable, and on what basis, depends on the contract and the governing law.

• Pushes it up: A long delay with significant work in progress funded by borrowing, and retention held well beyond the planned date.
• Brings it down: Prompt certification and payment during the delay period, which directly reduces the funding requirement.
• How to control it: Evidence the actual funding arrangements and the interest incurred, and ask a licensed legal adviser whether the head is recoverable under your contract before building it into the claim.

Inflation and price movement during the extension

Labour and material costs incurred later than planned may be higher. Recovery depends on whether the contract contains a fluctuation mechanism and on whether the extension itself gives rise to an entitlement to the increase. Where a fluctuation clause exists, the mechanism governs and a separate claim is usually unnecessary.

• Pushes it up: A long delay in a period of price movement, and a high content of imported material purchased later than planned.
• Brings it down: Early procurement of the dominant materials, and a contract with an index linked fluctuation mechanism.
• How to control it: Check the fluctuation clause first, then claim only the increase actually incurred on purchases made in the delay period, evidenced by quotations and invoices on both dates.

Demobilisation and remobilisation where work was suspended

Where the delay involved a suspension rather than a slow period, the cost of standing down and returning can be recovered separately. The evidence is the actual cost of the movements, the storage of plant and materials in the interval and the re establishment of the site.

• Pushes it up: A full suspension of long duration, specialist plant that had to leave site, and labour that had to be released and recruited again.
• Brings it down: Maintaining a reduced presence rather than a full demobilisation, where that is cheaper overall.
• How to control it: Document the decision to demobilise and the reasons at the time, since a later claim depends on showing the decision was reasonable when it was made.

Costs that never appear on the first page

• The cost of preparing the claim itself, including analyst and adviser time, which is often not recoverable as part of the claim.
• Management attention diverted from the remaining works, which frequently causes a second delay nobody claims for.
• Bond and insurance extension charges arising because completion moved.
• The deterioration of materials stored for longer than planned, which is a cost but may not be a prolongation cost.
• Loss of the opportunity to deploy key staff and plant on other work, which is real and difficult to evidence.
• The relationship cost, which shows up as a harder negotiation on everything else in the final account.

Keeping the budget honest

Build the claim from invoices, timesheets, hire records and payroll for the specific period, and show the comparison with the tendered allowance alongside it rather than instead of it. A claim built from actual cost with the evidence attached is assessable, and an assessable claim gets paid in part quickly. A claim built from a percentage or from the tender rate invites a global refusal, after which the whole exercise has to be done again.

• When entitlement for the period is established, which is when the quantum exercise can properly begin.
• At each month during the delay, when the records that will support the claim are still being created.
• Before submission, to test every head against the contract wording with your adviser.
• On receipt of the assessment, to identify which heads were accepted and which need better evidence.
• At the final account, when the remaining heads are settled alongside everything else.

Domira builds and supervises projects across Saudi Arabia, and the commercial discipline above is how its projects stay inside their budget and their programme. Send the drawings, the contract or the site and Domira will tell you where the risk actually sits.