Claiming Prolongation Costs when there is no Entitlement to an Extension of Time | Can it be done?
It is generally accepted that, in a situation where a contractor is entitled to an extension of time, he is also entitled to claim for time-related costs for the additional time that he was obliged to remain on site. Such costs are usually referred to as prolongation costs.
Are there situations, however, where a contractor may legitimately claim for the payment of costs when an extension of time is not warranted? Well, yes there are. Consider the following example:
The contractor is constructing a high-rise building and has a tower crane on site, which his programme shows is to be removed on a certain date. The contractor however receives a variation order to change the specification of the air-conditioning chiller, which is located on the roof of the building and needs to be hoisted into position by the tower crane. The change to the chiller requires modifications to be made at the factory where the chiller is being manufactured and this will delay the delivery of the chiller to a date later than the date by which the contractor had planned to remove the crane.
The contractor will therefore incur additional costs for keeping the tower crane on site from the time that he should have been able to remove the crane, to the date that he was able to hoist the chiller into position.
Such cost would be claimable.
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Thanks for everyone’s comments. As we can see, there are many different perspectives on this topic but the point I was trying to make is that in such circumstances, the costs are claimable and a good claims practitioner will look at events and consider them from all aspects to ascertain what is claimable or not.
Andy,
The prolongation of the crane is still prolongation costs but more specifically a time related cost due to a variation to the Works and not due to a critical delay to the completion date / time for completion.
Don’t be too critical
Craig
Any instruction by the Engineer (FIDIC) should be assessed for cost and time implications. A competent contractor would naturally consider the implications on his resources and allow for any such costs in his variation costs or at least highlight it to the Engineer that he will be seeking to be compensated for the costs. This should be done before the work is done. To try and claim for prolongation when there is no E.O.T would be trying it.
Interesting!
In my opinion, this is a classical example of a variation order (change order) initiated by the Employer/Engineer. Usually, there is a form (pro forma) wherein the Contractor will indicate/justify if this “variation/change” will have “time impact” and/or “cost impact” on the project, subject to approval by the Employer/Engineer.
It is a CR initiated and issued by the Client to the Contractor to assess the schedule and cost impacts. tobe sign off the CR for client review and approval.
I would support Jacques that the Contractor should claim it as a result of a variation when submitting his claim for hoisting down, repair and reinstalled it back to the new requested position by the Employer rather than to claim it as prolongation cost. Since there is not time extended for the work that is not on the critical path of the project.
Moataz,
Maybe by using the words ‘prolongation costs’, I have confused the issue because prolongation costs are associated with extension of time. Time-related costs would have better described the example that I gave. The main point is that such costs would be claimable and as mentioned by Jaques, I would claim these with the variation.
Disruption is where an event or action for which the Employer is responsible causes the Contractor to carry out the works less efficiently than he would have done had the event not occurred. Under such circumstances, the Contractor would incur additional costs and this would give reason for a claim for costs and possibly an extension of time.
I hope that this clarifies things and sorry for the confusion.
Andy
Wouldn’t the additional cost for extending the tower crane be included in the variation claim rather than be submitted as a prolongation claim?
Yes, I think so.
This would be additional cost under Employer’s risk other than a distinct claim under Prolongation cost.
Prolongation cost would mostly cover the additional indirect overhead costs but expenses for extension of the tower would, perhaps come under direct costs.
This is actually a good example. However, wouldn’t this incurred cost be classified and claimed as Disruption rather than a Prolongation cost?
It would be prolongation cost, irrespective of how it occurred. In this case, due to disruption.
This is a valuable blog.
The question to be answered is not if the Contractor is entitled to an extension of time for prolongation costs, but has he suffered a loss as a result of a risk which the Employer has carriage of.