Construction Delays and Prolongation Claims

The provided document is an assignment related to construction management and economics. It involves analyzing construction delays, including their types, causes, and severity. The document also discusses approaches to delay claims assessment employed in the UK construction industry, such as prospective time impact analysis. Additionally, it covers topics like a model for construction delays claims assessment, forensic schedule analysis, and empirical evidence of extension of time in construction projects.

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HOW TO GET EXTENSION OF TIME & COST CLAIMS – CASE STUDY ON SUBSTATION PROJECT IN
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HOW TO GET EXTENSION OF TIME & COST CLAIMS
-CASE STUDY ON SUBSTATION PROJECT IN SAUDI ARABIA
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Abstract
Disputes and claims in construction contracts will be consistently be involved in numerous
issues that are complex and numerous unique cases where the interpretation of the contract or
legal case precedents will not provide immediate solution. Nevertheless, strategies entailing
analysing time extension claims have developed and evolved in the recent years with a
combination of recommendations, practice guidelines, protocol, and surfeit of methodology
together with publications that has been prepared by experts. This paper emphasizes on
important principles and common problems concerning time extension claims within a case
study. The case study was carried out through the presently ongoing project, and the project
name is ‘EPC of 33 KV Switching Station’ in Saudi Arabia. Empirical data collected and
analysed from this running project. ( The approval to use this data was granted from
authorized Project Manager" Mr. Kundan S. Mehta (Project Manager) Contract # xxxxxx,
Contract Title xxxxxx, Mobile # +xxxxxxxx, email address …..................)
Keywords: Liquidated damages, culpable and concurrent delay, extension of time, disruption
and delay claims
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Table of Contents
1 Introduction.............................................................................................................................5
2 LR............................................................................................................................................5
3 Typical Delays in Electrical Substation Project .....................................................................8
4 Case Study...............................................................................................................................8
4.1 Revised Project Technical Specification (PTS) Excusable Compensable Delay.............8
4.2 Delay in Construction of Duct Banks & Detour removal by the Interface Contractors
“A” & “B” on the Cable Route (Excusable Non-Compensable Delay).................................9
5 Completion Time...................................................................................................................16
5.1 Extension Time...............................................................................................................16
5.2 Applying for time extension...........................................................................................16
6 Condition precedent .............................................................................................................17
7 Record keeping .....................................................................................................................18
8 Construction Program...........................................................................................................18
9 Causation and Types of Delay...............................................................................................21
9.1 Culpable and concurrent delay.......................................................................................21
9.2 Organizing Evidence of Delay.......................................................................................21
10 Resolution of Problem........................................................................................................21
10.1 Delay Claim Analysis...................................................................................................21
10.2 Liquidated Damages.....................................................................................................22
11 Conclusion...........................................................................................................................22
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List of Tables
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1 Introduction
Elongation and time extension claim for disruption and delay in construction industry
appear to experience the same issues over time, and in some way, it is still challenging to
come up with a collective approach to handle contractual frameworks and other possible
situations16.
In spite of the presence of the advanced software for construction schedules and
programmes, enhance delay analysis methods, and the sceptical simplicity of its usability,
evaluating the extension time is frustrating due to the failure of keeping up to date
programme which is made more complex by pathetic lack of concurrent record11. The
diagram (Figure 1) below illustrates the primary components of EOT claims. The next
section will review the relevant literature from books, journals, and the internet in relation to
the extension of the time claims.
2 LR
In the case study project’s scope consists of Engineering, Procurement and Construction of: -
• Two (2) numbers of 33kV Switching Stations CC-1 & CC-2.
• 33kV Direct Buried underground cable network including fiber optic cable
from CC-1 to Source Substation # 1 (S/S# 1) & CC-2 to S/S # 1.
• Modification work to connect the 33kV Switching Station feeder Cables at the
Source Substation 380/115/33kV S/S # 1.
Table 1 below illustrated the contract milestones for the project, contractor developed
baseline schedule based on contract milestone provided in the contract and the same was
submitted and get approved by Client accordingly.
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Table 1: Contractual Milestone
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Figure 1: EOT Claims Primary Components11. (Mohammadi & Birgonul, 2016)
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3 Typical Delays in Electrical Substation Project
Specifically, delays in construction are categorized into two major groups: non-
excusable (Unjustified) delays and excusable delays (Justified)1
 Non-excusable delays refer to the delays that is as a result of supplier or contactor.
Therefore, the contractor is not liable for any compensation and must come up with
strategies to ensure that the completion date is not affected8.
 Excusable delays are the kind of delays that have been either cause by the employer
or another phenomenon, as such, the contractor will need compensation in terms of
money or time or both 14. These delays can further be subdivided in to two type:
excusable non-compensable and excusable compensable.
These delays were analysed as it will be discussed in the subsequent sections of the case
study below.
4 Case Study
It could be observed from the report that project was going on as planned and was within
the schedule. Excusable non-compensable and compensable delays were the two key events
that interrupted the project and detail of both are as follows: -
4.1 Revised Project Technical Specification (PTS) Excusable Compensable Delay.
Excusable compensable delay was as a result of the failure to identify the type of scope
to follow even after having several meetings after being awarded the contract and advised to
analyse and give their response on new additional scope especially in terms of spare parts,
communication among other elements in the document. The contractor submitted the report
to the employer on September 7th, 2014. A number of discussions were held since then but
still there was no clear indication of what to follow. As a result, a meeting was organized to
discuss the above issue on January 30th, 2017 where the employer instructed the contractor to
proceed with the new project technical specification (PTS). The contractor designed and
resubmitted the submittal to the client and the same was approved.
Furthermore, release of manufacturing communication equipment was affected due to
the modifications that arose in ordinary course of project, therefore the client had to issue the
Design Change Notice (DCN) soon to recover the time and cost implication. This is vital in
ensuring that contractor is not penalized for the changes done by the client. The design
change notice prompts the contractor to take up the new design to enable them to adjust well
to the new design and come up with new timeline and budget. This subsequently affected
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other tasks such as delay in construction of duct banks and detour removal. Section 4.2
discusses this aspect.
4.2 Delay in Construction of Duct Banks & Detour removal by the Interface
Contractors “A” & “B” on the Cable Route (Excusable Non-Compensable Delay)
To install the medium voltage, 33kV Power cables & Fiber optic cable, feeding
switching stations CC-2, and to complete this task, duct banks are required for road and
utility crossing in the cable route. These duct banks supposed to be constructed by site
development contractors mentioned under heading above.
Contractor coordination meeting held between the interfaces contractors to discuss early
completion of the subject duct banks and removal of Detour from the cable route near old
gate #2
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Table 2: (Delay Events # 1 Revised PTS) for MS # 8
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See Table 2 above at page # 5 & Figure # 2 below at page # 7 defines the delay scenario encountered in project, it shows the comparison of
baseline dates versus current date & variance of finish date (Delay) of affected activities. The contractor presuming the new issuance date of
DCN# 1, June 16th, 2018 inserted in the current schedule and soon after the issuance of DCN # 1, Manufacturing for Communication System
start (Ref. Activity ID’s: D00221 & D00361 in Table # 2 and Figure #2 respectively and the same details shown in the red box) and all the
manufacturing activities are linked with the issuance of DCN # 1 by (Finish to Start) relationship. After rescheduling the network, the new
delivery date for the Communication System is January 30th, 2019 (Ref. Activity ID’s D00220, D00420, D00360 & D00370 in Table # 2 and
Figure #2 and the same details shown in the blue box). Therefore, new completion date for the MS # 8 (Complete delivery of all equipment and
materials, Ref. Activity ID’s M000045 in Table 2 & Figure # 2 and the same details shown in the yellow box) is January 30th, 2019 and baseline
finish date for the same is October 15th, 2017.
Considering the above reason MS # 8 shall be about 472 calendar days (67 Weeks) delayed than the contractual milestone date. Due to the
above stated delay on the delivery of Communication equipment all the succeeding activities are affected. Therefore, milestone no 9, 10 & 11
(Ref. Activity ID’s M000050 & M000060 in Table 3, Figure 3 & Table 4 & Figure 4 and Table 5 respectively at Page # 12 to 17 and the same
details shown in the yellow box) are affected. However contractor was unable to proceed with the Procurement of Communication system due
to; new PTS requirement having direct price implications on the original/approved BOQ prices. Said implication to the prices will be resolved
through DCN # 1.
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Figure 2: (Delay Event # 1 Revised PTS) for MS# 8
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Table 3:( Delay Events # 1& 2) for MS # 9
As per the Baseline Schedule, completion of all the duct banks was presumed to be completed for our cable installation on or before June 29th,
2017 (Ref. Activity ID - DE # 5.0.0-in Table # 3 & Figure No. 3 at Page No. 8 & 9 respectively and the same details shown in the red box) but it
was delayed. And consequently, cable installation activity got delayed for 301 calendar days from the baseline deadline and the new deadline for
the cable laying is June 12th, 2018. (Ref. Activity ID # C004070-in Table # 3 & Figure No. 3 and the same details shown in the blue box) Cable
installation activities belong to Milestone # 9 which is driven primarily by Delay Event # 1. Delayed completion of Electrical Duct bank by
interfacing Contractor has float created by Delay Event # 1. Based on 29 May 2018 actual completion of duct bank (Ref. Activity ID - DE #
5.0.0 in Table 3 & Figure 3 and the same details shown in the red box) by interface contractor, Delay Event # 2 has 23 Weeks of float before
impacting contract milestone # 9. Even though cable installation was 301 calendar days delayed from the baseline date, cable installation
activities are not identified within the critical path. This path for milestone # 9 is derived by system (Delay Event # 1, Ref. Activity ID-M000050
and the same details shown in the yellow box) Communication system (Ref. Activity ID – WJ0050 in Table # 3 & Figure No. 3 and the same
details shown in the black box).
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Figure 3: (Delay Event # 1 & 2) for MS# 9
Table 4: (Delay Events # 1& 2) for MS # 10
Figure4: (Delay Event # 1 & 2) for MS# 10
Table 5: Comparison between Contract Milestone and Proposed Milestone for EOT # 1
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5 Completion Time
Time of completion is considered important. Failing to meet the agreed deadline may
cause client to terminate contract. However, most contract in construction industry have
acknowledged date of completion can be altered by unpredictable circumstances. In
construction industry, contractor or client can be cause of delays and risks are addressed by
clauses describing time extension allowing setting of new dates of completion13. Clause on
liquidated damages proceed to work for new date.
Contractor obliged by contract to regularly continue with work and employ best
strategies to mitigate problems lead to delay in construction process and ensure work is
complete by agreed timeline 2. People shouldn't misinterpret statement that contractor needs
to put in more resources, rather contractor is responsible.
5.1 Extension Time
As discussed earlier, most of construction contracts has provision for extending
deadline to prevent any penalties. Contractor is given chance to reschedule and restructure
tasks for give client new completion date and embark on construction work7. If contractual
extension time was missing, then contractor would be obliged to finish work by agreed
deadline without failure6. Therefore, client loses right to liquidate damages because
contractor has completed work on time. In this case being investigated, each of Milestones
analysed and because of Delay Event # 1 that was employer delay event, a time extension of
384 days awarded to contactor to finalize completion and revised deadline of project will be
June 12th, 2019.
5.2 Applying for time extension
Contractor given time extension in reasonable and fair reasons like factors cannot
control, as to why contractor was unable to finish project on time. The two parties will agree
on specific data best suits everyone and contractor deliver project on time after an extension.
Essentially, contractor needs to request for time extension, an event occurs and give reasons
of how event halted project. Additionally, risk’s events associated with employer also be
analysed as construction work continues in terms of compensation and time extension8.
In cases where impact cannot be assessed more reasonably, time extension is granted
incrementally based on prevailing foreseeable effect, and project status reviewed regularly. In
special situations, an in-principle approval to time extension is awarded, and immediately
factor that has caused delay has been addresses then the extension time is granted 2. The
figure below illustrates EOT claim process.

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Figure 5: EOT Claim Process12 (Popescu & Jerz, 2013)
6 Condition precedent

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It refers to the notification that contractor need to provide to client for the purpose of
asking for extension time. On failing of giving notification, he/she will suffer liquidated
damages and relief stipulated in contract is forfeited. The contractor needs to provide the
necessary details and evidence detailing reasons why contractor must be awarded time
extension. As such, in a case of failure on contractor side, he is obliged to pay liquidated
damages.
7 Record keeping
Keeping of contract records is a very important aspect in contract projects. All
documents including project schedule, budget, progress, or any other changes made to
project are documented should be recorded and kept. This is important as they serve as
guidelines detailing what is required to complete project and roles of every stakeholder.
Records showing extension of time claims should also be kept. Project success depends on
availability of information and found in records. If client fails to submit information of time,
it is likely for project to be delayed.
8 Construction Program
A construction programs is normally one of requirements in any construction contract
but is not mandatory and doesn't make up part of contract document. The contractor is given
freedom to choose manner in which he will how about in construction work to achieve
desired goal by agreed deadline of there are no terms stating otherwise. The following are
examples of elements that make up a contrition program11: As-planned schedule is referred as the baseline schedule and described relationships
between activities in a construction site. As-built schedule refers to updated schedules on as-planned schedule which is
updated with progress-to-date information.
 Software: all stakeholders having common choice of software to be used for program
has ability to show all necessary logic links and critical path network with list of all
lags and leads. The figure below illustrates baseline and As-build schedule.

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Figure 6: Baseline and As-Build Schedule11 (Mohammadi & Birgonul, 2016)
8. Compensation
Prolongation Costs – It has been based on the factor of actual cost which has been
incurred by the contractor itself. It comprises of factors such as work done actually, time
which is actually required to be taken up, loss incurred or expenses which are actually
suffered by the party. Though it has been agreed by one party regarding the compensation
rate which generally reflectes the activity estimated on the work site during the time period in
which the contract has been signed. All these are required to be recalculated every time when
the delay occured insipte of any time extension has been allowed as the delay affects the
activity level at large as undertaken by the contractor. The prolongation cost shall be of
recoverable nature with reference to time when impact of employer event of risk recognised
and not at the time of reference made for the extended time period as made under a contract.
In such cas situation, it is considered difficult to agree on previous basis related to a daily rate
where such rate differs at several construction stages. Also, it becomes difficult to pre agree,
where there has been an increase beyond because of accumulation of the employer events
risk.
Disruption costs – The word disruption refered to as disturbance, interruption,
hindrance, nuisance which directly affects the working of the contractor. The disruption can

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result in hampering of the contractor's normal working process which directly affects the
profitability level of the contractor. It also results in decrease in the working efficiency,
overall business productivity, the growth and progress level (Hollmann, 2011). Also, such
kind of hinderances and interrution can result in loweing the performance level of the
contractor. In cash when such disruption is made by the employer itself, then either the
employer will be liable for bearing such cost under the contract or treated as damages for
making breach of the contract terms and conditions.
Compensation for concurrent dealys – In this aspect of contract, the contractor will
be entitled for recovering only to the cost which has been proven as the delay cost as caused
by the employer disruption to him. It is the duty of the contractor to separate the cost which is
associated with the delay and disruption as made by the employer and those cost expenses
which are caused by delay made by the contractor himself. The most important effect of thus
type of approach is that delay of concurrent nature will provide the contractor extension of
time and not will receive any compensation amount. It is applicable for case when dealy has
been caused by the employer which has resulted in giving rise to the compensation.
Compensation for lost float – This can happen in case when the delay made by
employer has deprived contractor from the advantage of his own float. In case if any part of
work activity has been completed by the contractor before the date of completion as
scheduled but the delay made by employer defines that the contractor has completed the work
as per the completion date progarmmed by making use of the available float (Christensen and
et.al., 2005). For this case situation, the contractor will receive compensation for time period
extended he has been on the site equal to the length pf consumed float. This feature of
contract should be agreed at the very begining and starting of the contract focusing on
identification of the activities to which float will be applied to each part.
Acceleration costs – This type of cost is applicable in case when the contractor is
having right to use the extended time period. Also such cost is used basically for accelerating
the work activities so as to achieve the goals within the scheduled date of completion. The
contractor will be given either no time extension or such low extensions whic has been earlier
agreed and has been paid such amount which is agreed or in form of reasonable sum with the
aim of compensating the contractor for the extra cost of the measures agreed so as to increase
the work and impact of such agreed measures on the different aspects of work done together
with the profit allowance. Also, the net effect of this agreed acceleration order will be
considered as the variation on the part of contract. In case of the contractor is not advised
related to any time entitlement, he will be considered under tremendous pressure and not
knowing about fact that he will be not be liable for damages of liquidated nature.

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9 Causation and Types of Delay
Basically, all delays caused by contractor including those identified as contractor risks
whether implied or express in contract cannot be compensated nor will contractor be granted
time extension10. Normally, delays involve monetary or time compensation, not necessary to
claim both at sametime. Delays of compensable are those arises result of negligence by
client.
9.1 Culpable and concurrent delay
Parallel delays are those arises as a result of one event when causes are within risk or
control of same party. On other hand, concurrent delays occur when both parties share
responsibility4. It has been said delay was a parallel delay as caused by one party, employer.
Where employer or contractor delays occurs, or is concurrent, the concurrent delay of
contractor should not cut off any time extension due10. In this case, contractor awarded time
extension as there were two concurrent events and one is on critical path.
9.2 Organizing Evidence of Delay
Analysis of delay or time impact done in case, issue or event occurs that results in delay
of project. As such, delay analysis document is to be framed to record circumstances and
facts concerning every cause of delay and effect it has on completion date12. The impact
analysis entails current schedule been updated, job conditions encountered, status of project
at time of delay, mitigation strategies been taken by contractor and excusable delays where
time extension still pending. Time impact analysis used in case project.
10 Resolution of Problem
10.1 Delay Claim Analysis
Number of standard construction contract forms don't handle time assessment extension
claim. Techniques to analyse delay claims vary, are difficult to use practically though are
simple to use15. In case project, each Milestones analysed because of Delay Event # 1 that
was employer delay event, time extension of 384 days awarded to contactor to finalize
completion and revised deadline of project will be June 12th, 2019. Disputes and claims in
construction contracts will consistently be involved in numerous issues are complex and
numerous unique cases where interpretation of contract or legal case precedents not provide
immediate solution. Nevertheless, strategies entailing analysing time extension claims have
developed and evolved in recent years with combination of recommendations, practice

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guidelines, etc. of methodology together with publications been prepared by experts15. This
paper provides standpoint into such claims and how being analysed, documented, and
submitted; particularly in industry evolving like construction industry still to create standard
strategy and guidelines in assessing and preparing such claims.
10.2 Liquidated Damages
Most employers find it hard to calculate amount of damages due to delays or late
completion. It is important to agree in advance sum of damages arise from delay. It is
important as provides conviction both to client and contractor regardless if loss of client turns
out to be less or more than agreed payable amount17. Liquidated damages are set lower than
potential loss amount to motivate contractor to avoid prices being inflated and high damages,
further encourage contractor to tender.
Also, courts often denied enforcing anything having penalty in nature. As such,
liquidated damages should be pre-estimated genuinely of possible losses to client and not
contractor or any other and is judged at period when contract agreed. It is considered
unforeseeable and penalty if amount states is just figure intended to keep contractor on time
and not associated with estimate possible loss 5
Liquidated damages are been set as lower in comparison to the potential losses in
order to encourage the contractors for the tender and also in avoiding the prices that are being
inflated in respect of allowing the risk of getting exposed to the unspecified or the high
damages. Therefore, the liquidated damages, are the pre-estimate relating to the probable
losses towards the employer, not to any other person and are judged when contract is been
made.
11 Conclusion
All big projects are delay and subjected to cost and time extension due to many
factors like uncertainties. As per project’s empirical data collection and analysis, it is not
exceptional to avoid cost and time extension claim. Due to facts from empirical data analysis,
project entitled to claim cost and time extension under ‘excusable delay’.
Every milestone analysed and due to delay event number one caused by employer
contractor awarded equitable time extension for milestones 8, 9, 10, and 11 to enable
contractor to finish project within new deadline. Due to factors explained in chapter 4 & in
other chapters of the paper, though project supposed to be completed as per contractual time
schedule. Contractor entitled to claim time extension under ‘excusable delay’ and as a result
delay Event # 1 was employer delay event so that time extension of 384 days awarded to
contractor to finalize completion.

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However it is difficult and complex task to assess cost entitlement and extension of time,
and evaluate disruption and delay claims because of numerous delay causes and several
activities involved. In construction industry, contractor or client can be cause of delays and
such risks are addressed by clauses describing time extension allowing stakeholders to set
new dates of completion. It is important to determine the liquidated damages in order to
keep control over the actual cost as it helps in determining the potential loss that could
be incurred in the future and provides for the corrective measures in respect of
attaining lower amount of loss. It also helps in assessing the risk relating to the high
damages.

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