Driver Trett Digest Issue 26 - Flipbook - Page 12
CLAIMS FOR
PROLONGATION COSTS
Scott Stiegler, Partner — International Construction Disputes, Vinson and Elkins
A familiar situation: the project is late, but relief is in
sight. The time for completion has been extended, so
we can claim for our additional costs. However, the
groundwork for such a claim should not be overlooked.
Prolongation costs are categorised as time related
costs incurred as a result of a critical delay event
extending the duration of the works for reasons not
attributable to the contractor. Such claims, however, do
not automatically flow from a successful extension of
time claim, particularly, for example, where there has
been concurrent delay.
When bringing a prolongation costs claim, a contractor
should consider carefully the contractual terms, paying
attention to the following:
Whilst the precise wording is determinative
of whether the provision will be treated as a
condition precedent, where there is a failure to
comply with the contractual notice provisions it
can still affect entitlement because of breach of
contract.1
The required content for a notice will also be contract
dependent. It is best practice to notify the type of claim
being made. When it comes to notifying a claim for
an extension of time, it is prudent to also notify of the
corresponding claim for prolongation costs at the same
time.
CAUSATION
1. What notification requirements exists;
2. The evidence needed to demonstrate the causal link
between the delaying event and costs incurred; and
3. How costs are to be substantiated.
NOTIFICATION
When an event arises which a contractor considers
may cause critical delay and consequently, will result
in additional time-related costs, thought should
immediately be given to the contractual notice
provisions. In particular:
1. The form and method of delivery for the notice;
2. The timing of the notice; and
3. The content of the notice.
The form and delivery method for the notice are
often specified in the contract, including for example,
the requirement to be in writing, to whom it should
be addressed, and the method of delivery. Notice
provisions are regularly drafted to operate as a
condition precedent to entitlement, meaning failure
to comply could result in losing the right to bring the
claim. Such provisions are readily enforceable, and
examples are found in a number of standard form
contracts, including the FIDIC suite of contracts.
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Having notified the claim, the contractor should turn
to causation. A claim for prolongation costs is a claim
for actual time related costs incurred as a result of the
delay. A common pitfall is the belief that the analysis
necessary to establish entitlement to an extension of
time will be the same as that needed to demonstrate an
entitlement to prolongation costs.
As explained in Costain Limited v Charles Haswell
& Partners Limited: “in order to recover substantial
damages, the contractor needs to show what losses
he has incurred as a result of the prolongation of
the activity in question. Those losses will include the
increased and additional costs of carrying out the
delayed activity itself as well as the additional costs
caused to other site activities as a result of the delaying
event. But the contractor will not recover the general
site overheads of carrying out all the activities on site
as a matter of course unless he can establish that the
delaying event to one activity in fact impacted on all the
other site activities.”2
1 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.
