Price prolongation at the cost run-rate when the delay was felt, not the end of the job

Entitlement gets the attention; quantum loses the money. A contractor can hold a granted extension of time for a compensable cause and still watch its prolongation claim shredded, because the costs were derived from tender rates instead of actuals, claimed for the wrong period, padded with a formula overhead figure nobody can defend, or double-recovered against variation margins. This is the quantum discipline, with workings.

Unless the contract fixes a daily amount for delay costs, a prolongation claim compensates actual loss; it is not a re-rating exercise. The starting point, consistent with the SCL Delay and Disruption Protocol (2nd ed, 2017) and orthodox practice, is the actual time-related cost incurred because the project ran longer: not the preliminaries rate in the contract sum, not the tender allowance, but what the delay genuinely cost. Tender allowances have limited relevance; the cost records carry the claim (Protocol Core Principles 20, 21).

The recoverable heads are the genuinely time-related ones: site supervision and staff, site facilities and services (sheds, fencing, power, water, IT), standing or retained plant, site-specific insurances and securities held longer, and, where proved, escalation pushed into costlier periods and financing or holding costs (recoverable in principle in Australia on Hungerfords v Walker(1989) 171 CLR 125 reasoning). Fixed one-off costs (mobilisation, establishment) don't belong; they were incurred regardless.

The Protocol's core principle, and the most commonly violated rule in prolongation practice, is that compensation is assessed by reference to the period when the effect of the delay was felt, not the extended period at the end of the job (Core Principle 22). A four-week compensable delay in month 3 is quantified from month 3's actual time-related cost run-rate (when the site was fully staffed), not from the cheaper, demobilising tail months the project gained at the end. Window the costs to the delay events.

A compensable delay of 20 days (here, working days; calendar-time costs such as hire, insurances and guarantee fees have been converted to a working-day rate) is established in a period when the site records show actual time-related costs of:

The records behind each line: site staff (project manager, engineer, supervisor, admin) from the payroll and cost report; site establishment (sheds, services, IT) from supplier invoices; standing plant (tower crane and hoist, net of de-hire options) from the plant ledger; the securities and insurances extension from bank and insurer advices.

Each line traces to a document; each rate is the actual cost in the affected window; plant is claimed net of mitigation (could it have been de-hired?). That traceability, not the arithmetic, is what survives scrutiny.

The contested head is head-office overheads and profit: the argument that the delayed project tied up the contractor's organisation, preventing it from earning contribution elsewhere. Three formulas circulate: Hudson (tender OH&P percentage applied over the delay), Emden(the contractor's actual organisation-wide overhead percentage from its accounts), and Eichleay (overheads allocated to the project pro rata by billings, converted to a daily rate).

Treat them honestly or not at all. The Protocol's position is blunt: formulas may be used with caution, only afterthe contractor demonstrates it actually suffered unabsorbed overheads and lost the opportunity to earn contribution elsewhere (Part C, paras 2.6 to 2.8), and “the use of the Hudson formula is not supported” (para 2.10), because it depends on the adequacy of the tender and double-counts (the contract sum it is applied to already contains OH&P, so OH&P is counted twice). In England, Walter Lilly & Co Ltd v Mackay[2012] EWHC 1773 (TCC) at [543] requires proof on the balance of probabilities that, but for the delay, the contractor would have secured work generating the claimed contribution; the court treated a formula as a legitimate way to calculate that return once proved. The Protocol puts it plainly: a formula “just serves as a tool for the quantification of the loss” (Part C, para 2.8).

So the head office claim is built from evidence first: tendering records showing opportunities declined or not pursued during the delay window, capacity constraints, management time records showing key staff locked to the delayed job. Then a formula, Emden or Eichleay rather than Hudson (Part C, para 2.11), converts the proven loss to a number.

The respondent's quantum expert will hunt three overlaps, so remove them first. Variations: where variation pricing included time-related preliminaries or OH&P margins for the same period, the prolongation claim must credit them. Where a variation was priced to include its own delay costs (whether a variation can carry its own time-related costs depends on the contract), those days can't be claimed again. Disruption: prolongation (time-related cost of a longer project) and disruption (productivity loss within activities) are different losses; claim both only with costs segregated so nothing appears twice. Acceleration: costs of accelerating to mitigate a delay cannot be recovered alongside the prolongation they avoided; one or the other, with a credit. If Eichleay is used and variations exceed about 10% of the final contract value, the Protocol requires an adjustment to the formula's inputs (Part C, para 2.11).

1. 01

   Pricing from tender rates instead of actuals. Tender allowances have limited relevance; the cost records carry the claim.

2. 02

   Costing the tail. End-of-job costing is the first thing a competent respondent attacks.

3. 03

   Leading with a formula. No proven lost opportunity, no head-office head: a modest, evidenced claim beats an ambitious formula number that invites the tribunal to doubt everything else.

4. 04

   Leaving the overlaps in. Double recovery against variation margins, disruption or acceleration is the standard attack.

• Build the daily rate from the affected window's records(payroll, supplier invoices, plant ledgers) and exhibit them. Where the contract does not fix a delay-cost rate, a claim that says “preliminaries: $X per day per the contract” announces its own weakness.
• Window the claim to when the delay was felt. Map each compensable delay to its period and cost that period.
• Claim net of mitigation. Standing plant that could have been de-hired, staff who could have been redeployed: claim net of what a reasonable contractor would have saved, and show the consideration.
• Make the head-office claim earn its place. Prove the lost opportunity first, then use a formula to convert it to a number.
• Run the double-recovery audit before the respondent does. A one-page reconciliation (prolongation vs variation margins vs disruption vs acceleration), filed with the claim, converts the standard attack into a strength.

Get advice before you price a prolongation claim under a delay-cost clause you have not checked, when a head office overhead claim is in play, and when variations or acceleration have been priced over the same period. The answer turns on the wording of your contract and the records you hold.