Understanding Prolongation Claims in Construction Projects

Construction projects are complex endeavors that often face unexpected delays due to various factors such as weather conditions, changes in design, late delivery of materials, or unforeseen site conditions. When such delays are not the contractor’s fault, they may be entitled to make Prolongation Claims—a common but often contentious feature in construction contracts. This article explores what prolongation claims are, their legal basis, how they are assessed, and best practices for managing them effectively.

What Are Prolongation Claims?

Prolongation claims refer to compensation claims made by a contractor for additional costs incurred due to an extension of the project period. These costs might include increased site overheads, extended use of equipment, additional labor charges, or other time-related expenses that arise because the project has taken longer to complete than originally planned.

Unlike claims for direct losses or damages, prolongation claims are specifically concerned with the cost implications of delay, provided the delay is not caused by the contractor. These claims are typically made under the terms of the construction contract, particularly under clauses that deal with delay, extensions of time, and compensation events.

Legal Basis for Prolongation Claims

To succeed with a prolongation claim, a contractor must usually satisfy several legal and contractual conditions. These typically include:

1. Entitlement to an Extension of Time
   First and foremost, the contractor must establish that they are entitled to an extension of time due to a qualifying event under the contract—such as employer delays, late instructions, or force majeure events.

2. Proof of Loss
   The contractor must demonstrate that they have suffered a financial loss as a direct result of the delay. This involves providing accurate and detailed records of site costs, overheads, labor, and other time-related expenses.

3. Causation
   There must be a direct link between the delay event and the additional costs incurred. In other words, the delay must have actually caused the prolongation and associated losses.

4. Compliance with Notice Requirements
   Most construction contracts require the contractor to notify the employer of delays within a specified time period. Failure to comply with these notice requirements can result in the loss of entitlement to claim.

Common Causes of Prolongation Claims

While every construction project is different, some typical causes of prolongation claims include:

• Late issuance of drawings or instructions by the client

• Delays caused by other contractors or suppliers under the control of the employer

• Adverse weather conditions not anticipated at the planning stage

• Unexpected site conditions such as contaminated land or archaeological finds

• Changes in scope or late design modifications by the employer

Each of these scenarios may entitle the contractor to additional time and/or compensation, depending on the terms of the contract.

Types of Costs in a Prolongation Claim

Prolongation costs usually fall into several categories:

1. Site Overheads
   These are ongoing costs of maintaining a site presence, such as site management, temporary facilities, insurance, and utilities. If a project is delayed, these costs will continue to accrue beyond the originally planned completion date.

2. Head Office Overheads
   Also known as “unabsorbed overheads,” these are indirect costs that the contractor expected to cover by completing the project on time. If a delay prevents the contractor from moving on to other projects, they may seek to recover these costs.

3. Equipment and Plant Costs
   Extended hire or depreciation costs related to machinery or equipment that remains on site longer than planned.

4. Labor Costs
   Additional wages and associated labor costs that result from keeping the workforce employed beyond the original project duration.

Assessing and Valuing Prolongation Claims

Valuing a prolongation claim can be complex. It requires detailed documentation and often the use of specialized methods such as:

• The Hudson Formula
  A commonly used method for calculating unabsorbed head office overheads based on the contract value and the extension period.

• Actual Cost Method
  This is the preferred approach and involves using real-time cost data from project records. This method is more accurate but requires meticulous record-keeping.

• Total Cost Method
  Less commonly accepted, this method calculates the difference between the actual cost and the estimated cost and attributes the entire difference to delay—often rejected by courts due to its imprecision.

Regardless of the method, courts and contract administrators usually expect a high level of detail and justification.

Challenges in Making Prolongation Claims

Despite being a legitimate contractual right, prolongation claims are frequently disputed. Common challenges include:

• Insufficient Evidence
  Contractors may fail to keep detailed records, making it hard to demonstrate the link between the delay and additional costs.

• Failure to Comply with Contractual Procedure
  Missing notification deadlines or failing to submit required documentation can invalidate the claim.

• Disputed Causation
  The employer may argue that the delay was due to the contractor’s own actions or that the event did not actually cause the claimed loss.

To avoid these pitfalls, contractors must ensure diligent project management, documentation, and timely communication.

Managing Prolongation Claims: Best Practices

To improve the chances of success with a prolongation claim—and to reduce the risk of disputes—consider the following best practices:

1. Understand the Contract
   Know the contract inside and out, particularly clauses related to delay, notice, and compensation.

2. Keep Detailed Records
   Maintain a thorough daily log of site activity, labor hours, equipment use, and communication with stakeholders.

3. Issue Timely Notices
   Notify the client promptly of any events that may lead to delays or increased costs, in the format and timeline specified in the contract.

4. Engage Experts When Necessary
   Use quantity surveyors, delay analysts, and legal advisors to help build and present the claim.

5. Collaborate and Communicate
   Open lines of communication with the employer or contract administrator can often resolve issues before they escalate into formal disputes.

Conclusion

Prolongation claims are an essential tool for contractors seeking compensation for project delays beyond their control. However, successfully pursuing such claims requires a solid understanding of contractual rights, meticulous documentation, and adherence to formal procedures. With proactive planning and professional advice, contractors can navigate the complexities of prolongation claims and protect their financial interests without jeopardizing project relationships.