CLAIMS FORPROLONGATION COSTSScott Stiegler, Partner — International Construction Disputes, Vinson and ElkinsA familiar situation: the project is late, but relief is insight. The time for completion has been extended, sowe can claim for our additional costs. However, thegroundwork for such a claim should not be overlooked.Prolongation costs are categorised as time relatedcosts incurred as a result of a critical delay eventextending the duration of the works for reasons notattributable to the contractor. Such claims, however, donot automatically flow from a successful extension oftime claim, particularly, for example, where there hasbeen concurrent delay.When bringing a prolongation costs claim, a contractorshould consider carefully the contractual terms, payingattention to the following:Whilst the precise wording is determinativeof whether the provision will be treated as acondition precedent, where there is a failure tocomply with the contractual notice provisions itcan still affect entitlement because of breach ofcontract.1The required content for a notice will also be contractdependent. It is best practice to notify the type of claimbeing made. When it comes to notifying a claim foran extension of time, it is prudent to also notify of thecorresponding claim for prolongation costs at the sametime.CAUSATION1. What notification requirements exists;2. The evidence needed to demonstrate the causal linkbetween the delaying event and costs incurred; and3. How costs are to be substantiated.NOTIFICATIONWhen an event arises which a contractor considersmay cause critical delay and consequently, will resultin additional time-related costs, thought shouldimmediately be given to the contractual noticeprovisions. In particular:1. The form and method of delivery for the notice;2. The timing of the notice; and3. The content of the notice.The form and delivery method for the notice areoften specified in the contract, including for example,the requirement to be in writing, to whom it shouldbe addressed, and the method of delivery. Noticeprovisions are regularly drafted to operate as acondition precedent to entitlement, meaning failureto comply could result in losing the right to bring theclaim. Such provisions are readily enforceable, andexamples are found in a number of standard formcontracts, including the FIDIC suite of contracts.12Having notified the claim, the contractor should turnto causation. A claim for prolongation costs is a claimfor actual time related costs incurred as a result of thedelay. A common pitfall is the belief that the analysisnecessary to establish entitlement to an extension oftime will be the same as that needed to demonstrate anentitlement to prolongation costs.As explained in Costain Limited v Charles Haswell& Partners Limited: “in order to recover substantialdamages, the contractor needs to show what losseshe has incurred as a result of the prolongation ofthe activity in question. Those losses will include theincreased and additional costs of carrying out thedelayed activity itself as well as the additional costscaused to other site activities as a result of the delayingevent. But the contractor will not recover the generalsite overheads of carrying out all the activities on siteas a matter of course unless he can establish that thedelaying event to one activity in fact impacted on all theother site activities.”21 London Borough of Merton v Leach (1986) 32 BLR 51,page 54 and 90 on issue 14.2. Costain Limited v Charles Haswell & Partners Limited[2009] EWHC 3140 (TCC) at paragraph 184.
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