The meaning of prolongation is the ‘extension of the duration of something’. In the construction contract, when the original duration of the contract elapses, the project is said to be in a ‘prolonged period’.
Delays are common in the construction industry as the construction projects are complex and involve various variables and stakeholders. The assessment of the prolongation costs becomes crucial in construction claims when delays in the overall project result substantial extension of the project duration. The additional expenses due to the delays by project prolongation are referred to as “prolongation costs” and precise estimation of these costs is necessary for both efficient project management and fair dispute resolution.
These expenses represent the actual costs incurred as a result of an extended stay at the site. The following steps are followed to assess such prolonged on-site expenses:
Identify actual costs: Gather all actual costs incurred during the project by reviewing sources such as the project cost ledger, invoices, bank statements, timesheets, and ERP systems.
Categorize costs: Classify the costs based on the standard or existing accounting practices typically followed in construction projects.
Segregate costs: From the categorized costs, distinguish between direct and indirect costs (time-related and non-time-related). Further, exclude all direct costs from this analysis.
Calculate time-related indirect costs: Identify time-related indirect costs over the entire project period and compute the per-day time-related costs for each month or defined delay window period.
Determine extended stay costs: Multiply the calculated per-day time-related indirect costs by the number of delay days for each delay window to determine the extended on-site expenses.
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