Case Note: Why a Prolongation Claim Was Difficult to Substantiate

This is a fictional composite example prepared for education. It does not describe an identifiable client, project or claim outcome.

A contractor received an extension of time and submitted a prolongation claim based on its tendered monthly preliminaries multiplied by the extended period. The contractor expected the time award to provide sufficient support for payment. Assessment showed that the submission had not clearly established which delay events entitled it to additional money, what costs those events caused, or whether some expenses had already been recovered elsewhere.

A prolongation claim needs more than evidence that completion was delayed. It requires a clear connection between the contractual entitlement, the effects of the relevant events and the additional costs claimed.

Three key points

• An extension of time does not automatically establish entitlement to prolongation costs.

• The claim should connect each compensable event to its effect on progress and the additional expenditure incurred.

• Tendered preliminaries and percentage additions need an appropriate contractual and evidential basis.

Commercial problem

The contractor’s submission combined:

• site management salaries throughout the extended period;

• continuing site accommodation and temporary facilities;

• extended plant hire;

• labour standing time;

• head office overheads and profit; and

• finance charges.

The supporting documents included an extension-of-time decision, the priced preliminaries bill and selected invoices. However, the claim did not distinguish the events supporting time entitlement from those supporting monetary entitlement.

It also applied one average monthly cost across periods when site resources differed substantially. Some plant expenses appeared both in the prolongation schedule and in variation submissions.

These gaps made it difficult to assess the claim, even where individual costs appeared credible.

Professional framework

The Contractual Claims practice note, jointly prepared by the Hong Kong Institute of Surveyors, the Association of Consultant Quantity Surveyors and the Hong Kong Construction Association, provides a useful assessment framework.

Its guidance addresses identification of the relevant event, verification of the facts, the effect on progress, compliance with notice provisions and substantiation of the time and money claimed.

The note mainly concerns contractual claims under HKIA/HKIS standard forms. The actual contract, including amendments, must therefore be checked before applying its guidance.

The practical lesson is to build the claim around entitlement, cause and effect, and evidence of additional cost.

Why the claim became difficult to substantiate

1. Time entitlement was treated as money entitlement

The contractor relied on the extension-of-time award without separately identifying the provisions allowing recovery of loss and expense.

Depending on the contract, some events may justify additional time without additional payment. Each event should therefore be reviewed against the applicable time and monetary provisions.

Prepare an event schedule recording:

• the event and relevant dates;

• the contractual basis for time and money;

• notices and submitted particulars;

• the extension-of-time assessment; and

• the outstanding entitlement questions.

2. The delay narrative did not explain the actual effect on progress

The submission listed late instructions but did not explain which activities were affected, whether those activities were critical at the relevant time, or what would have happened without the instructions.

An original programme alone may not explain the position when a delay occurred. Programme updates, actual progress, access records and site correspondence should be reviewed together.

Where employer-related events overlap with contractor delay, the analysis should identify that overlap. Complex concurrency issues may require specialist delay and legal advice.

3. The cost calculation relied on tendered preliminaries

The contractor divided its tendered preliminaries by the original contract duration and applied that monthly average to the extended period.

That calculation did not distinguish one-off expenditure from continuing costs. It also assumed that the full site team and plant remained deployed throughout the delay.

Where the contract requires ascertainment of actual additional expenditure, tender pricing alone is insufficient. Review the resources retained, the stage of the works and the costs attributable to the relevant events.

4. Different heads of claim overlapped

Extended plant hire appeared in both variation pricing and the prolongation schedule. Labour standing time was included without separating it from the disruption claim.

Each expense should appear once, with a clear explanation of its purpose and recovery basis.

A reconciliation should identify amounts already included in variations, other claims or previous assessments and remove duplicated recovery.

5. Supporting records did not establish the claimed loss

Invoices showed that expenditure had occurred, but did not always explain why it was additional or attributable to the compensable event.

Head office overheads, profit and finance charges were added without sufficient supporting calculations. A formula or percentage does not, by itself, establish entitlement or loss.

For each material item, identify the expenditure, relevant period, causal connection, supporting record and any amount already recovered.

Common contractor misjudgements

• Assuming that every day of an extension of time carries a corresponding daily cost entitlement.

• Treating tendered preliminaries as proof of actual additional expenditure.

• Assuming that invoices alone establish causation.

• Applying overhead and profit percentages without checking their basis.

• Leaving notices, programme records and cost evidence until project close-out.

To discuss EOT and Loss and Expense Application Support, Contact Us with a brief project background, the issue and any deadline. The initial review can include L&E cost evidence and quantum; further application preparation must be agreed separately. Provide confidential documents only after separate arrangements are confirmed.

For general market reference, see the Hong Kong construction labour and materials cost data. Market data may help explain a cost assumption, but cannot establish the actual additional expenditure incurred on a particular project.

QS review framework

• Review the contract provisions and amendments governing time, loss and expense, notices and particulars.

• Create an event register separating time entitlement from monetary entitlement.

• Verify the event chronology against instructions, correspondence and site records.

• Coordinate with the planner and contract administrator on progress effects and the relevant periods.

• Separate prolongation, disruption, variation and other claim items.

• Link each cost item to the event, resource, period and supporting expenditure record.

• Reconcile amounts already assessed or recovered and remove duplication.

• Prepare a submission showing the claim basis, calculation, evidence gaps and outstanding assessment questions.

Fictional example

A building contractor receives an eight-week extension of time. It claims HK$800,000 by applying its tendered preliminaries allowance of HK$100,000 per week.

The review identifies that the time award covers more than one event, with different potential monetary entitlements. Site staffing also reduced during part of the period, certain preliminaries were one-off costs, and some plant hire had already been included in a variation.

The contractor rebuilds the submission around the relevant events and periods, supported by payroll allocations, hire records, invoices and site records. It separately identifies unsupported items and removes duplication.

The revised submission gives the assessor a clearer basis for review. The recoverable amount remains subject to the contract, causation and substantiation; the eight-week time award does not settle the monetary claim.

Contractor checklist

• Is each claimed event linked to a contractual monetary entitlement?

• Have notice and particulars requirements been checked?

• Do programme and site records explain the event’s actual effects?

• Have overlapping causes of delay been identified?

• Does the calculation reflect the resources actually retained?

• Are one-off costs separated from continuing costs?

• Are prolongation and disruption items clearly distinguished?

• Have amounts recovered through variations or other assessments been reconciled?

• Are overheads, profit and finance charges separately justified?

Documents to prepare first

• Executed contract, amendments and relevant claim provisions;

• Notices, particulars, instructions and key correspondence;

• Baseline programme, updates, progress reports and extension-of-time assessments;

• Site diaries, manpower returns and plant records;

• Payroll allocations, invoices, hire agreements and cost ledgers; and

• Variation assessments, previous claim submissions and a reconciliation of amounts already recovered.

When the position should be reviewed promptly

Review the position promptly when a delay event arises, notice requirements may apply, additional resources are being retained, or the assessor requests further particulars.

Waiting until completion can make programme records and cost evidence harder to recover. Commercial QS support can help organise the claim, identify evidence gaps and prepare a reasoned assessment basis. The contract administrator’s responsibilities and any legal issues must be addressed under the actual contract.

Reference

Practice Notes for Quantity Surveyors — Contractual Claims, jointly prepared by the Hong Kong Institute of Surveyors, the Association of Consultant Quantity Surveyors and the Hong Kong Construction Association. The supplied document carries a November 2012 date.

Official HKIS practice note