Prolongation costs are the additional time-related costs incurred by a contractor as a direct result of the extended duration of the works caused by qualifying delay events. This guide explains how to identify, calculate, and substantiate prolongation cost claims.
Prolongation costs are the additional time-related costs incurred during the extended period of the works. They are distinct from disruption costs (loss of productivity) and acceleration costs (measures to mitigate delay).
Typical prolongation cost heads include: (1) Site management and supervision, (2) Site establishment and running costs, (3) Plant and equipment standing time, (4) Temporary works maintenance, (5) Insurance premiums, (6) Bond and guarantee costs, (7) Head office overheads, (8) Finance charges, (9) Additional subcontractor costs, (10) Loss of profit.
Head office overhead is one of the most contested heads. The two main formulae are Emden (preferred, uses actual overhead rate) and Hudson (uses tender allowance).
The two main approaches are actual cost (preferred where records allow) and formula-based (Emden, Hudson, or Eichleay for head office overheads). The SCL Protocol recommends actual cost wherever possible.
Acceleration costs may also be recoverable where the contractor was forced to accelerate due to the employer's refusal to grant a legitimate EOT.