Delays extend a construction project’s duration and timeline. This results in financial consequences to all parties involved in that project. The end result? Consulting expert services to help avoid delay induced damages and even recovering from them.Â
The financial consequences coming can have both negative and positive financial ramifications for owners, contractors and companies providing architectural and engineering services. This depends on the cause, effect and liability for the delay.
For most project owners, a lot of construction contracts do contain provisions for projects being delivered late. This is usually referred to as liquidated damages.
What do construction contracts contain for time extensions?
For most contractors, these contracts contain provisions for time extensions. As a consequence of delays due to unforeseeable problems, these provisions are worth it, but do not necessarily provide compensation. This is what expert services have to say.
There are basically two kinds of delays, and they are excusable and compensable delays. THe former is categorized under weather and other natural acts causing the delay. The latter is caused by influences of the parties involved, or any other things not foreseeable by contractors when they sign the contract.
Compensable delays involve factors such as design changes, extra work requests, work delays and modifications in the contract.
To recover from the financial impacts of these delays, contractors must exhibit the fact that the cause, effect and liability for the delays can be pointed to other parties who also signed the contract.
The kind of damages which contractors can recover
Here are the kinds of damages that can be recoverable by contractors:
- Extended field overhead costs.
- Appreciation of expenses.
- Home office overheads which have not been absorbed.
- Idle labor and equipment expenses.
- Additional expenses of storing materials
- Additional expenses to financing and bonding.
Extended field overhead costs
Also known as site overheads, they are a kind of delay damages which can come from either a core project delay or an extended project duration.
Field overhead expenses consist of indirect expenses which are needed to support the work in the field. They are already calculated as the project’s direct expenses. Here are some common components of such costs:
- Rent for field office.
- Field office staffs’ salaries.
- Vehicles of such staff.
- Utilities and phones for them.
- Consumables costs.
Home office overheads which have not been absorbed.
THey are also common but more complicated in terms of delay damages. Like the previous one they are caused by a core project delay or an extended duration of a project. Home office overhead costs are taken to support construction work, but are not direct expenses.
Usually the contractor’s home office overhead delay costs are proportioned to each individual project the contractor has. Meaning each project needs to absorb its fair share of the contractor’s expenses of the home office.
Appreciation of expenses
Also known as cost escalation, if a contractor’s work is delayed by a compensable delay from one labor agreement period to the other, it will cause them to pay higher wages. Contractors might be entitled to additional compensation. THis is one example of cost escalation.
Idle labor and equipment expenses
Costs of idle labor and equipment can be caused by both critical and non-critical delays. These expenses can also be a result of inefficiency, descriptions and work interruptions caused by project owners.
The contractor can be entitled to recover additional expenses of labor and equipment halted by a stop work order. THey can additionally do so during the time waiting for design modifications. The suspension wouldn’t necessarily mean a critical delay for contractors to be entitled to payment in this matter.
Additional expenses of storing materials
Additional costs of storing materials usually aren’t limited to critical construction project delays. Similar to the previous one, they can be caused by inefficiency, interruptions and disruptions from project owners in the construction work. Can they be part of construction claims? Industry experts believe so.
Additional expenses to financing and bonds
When a delay takes place on a construction project and it results in extended work, a contractor can be required to pay additional expenses to extend the work, for payment bonds too, and for project financing too. These expenses can be recovered if the delays are proven to be created by other parties who have agreed to the contract.
