Written by Lyle Charles
To understand the cost of a delay claim, it is important to break down the components of a construction delay claim. Claims are based on damages in relation to the type of claim or the theory of liability. Theories of liability are divided into breaches of contract or tort. The former will look at breaches of the contract, while the latter will deal with civil wrongs. Here are some components that form part of costing construction delay claims.
Cost accounting to calculate delay claims – Costing construction costs can be direct and indirect. Direct costs are those that can be directly tied to the project (for example labor). While indirect costs are those that are divided among all projects that are currently in progress. Costs can also be divided into fixed and variable. Fixed costs are those that remain the same although the amount of work will fluctuate. While variable costs will increase or decrease depending on the amount of work.
The measure of damages depends on the relationship to the project – The damages that are stated by the project owners will be different to those sustained by the contractor.
Project owner delay claim components – These costs are divided into liquidated damages and actual damages. Liquidated damages are those that have been specified for a particular period in the prime contract. If there are no liquidated damages in the contract, then the owners will have to look at actual damages. Actual damages could include extra supervisor expenses, overhead and other expenses caused due to the delay.
Contractors delay damage components – These can include indirect costs due to extended performance, increase material costs and lost productivity etc.
Construction companies should take a proactive approach to reducing delay claims by recruiting a construction claims management team, who will overlook the entire project.
Lyle Charles is a construction claims consultant who can cater to your construction project needs.