Everyone knows that delays in certain things can have certain consequences. No one wants to endure them because of hefty fines. The construction industry has been hit hard by delays multiple times. The implications in financial terms are serious for all parties involved; architects, contractors, engineering companies, and construction companies.

Such implications have usually negative outcomes for project owners, contractors, architectural firms, and engineering companies. Often this depends on the cause, effect, and liability of delays caused.

For project owners, contracts usually contain provisions of certain nature. They ensure that late delivery of projects can indemnify them from certain things. Even provisions for liquidated damages are present.

What kind of delay factors are present in construction?

For most contractors, contracts of construction usually have provisions for extension of time. This happens due to delays created by issues and reasons unforeseen. Compensation however does not necessarily mean something that can cause the delay.

There are two kinds of delays namely compensable and excusable delays. The latter are caused by factors like weather and other natural disasters plus acts not in the control of man.

Compensable ones are caused by influences or pirates which contractors did not foresee. This happens when the contract is to be signed. Factors like amendments in design, extra work orders, work stoppages, modifications in contracts, and vice versa.

For those who wish to recover from the financial consequences of these kinds of delays, contractors must demonstrate on their part the cause, effect, and liability of such. They need to prove their attribution to the actions of other parties who are signatories to the construction project’s contract.

What kinds of damages contractors can recover caused by delays?

Contractors can recover the following kinds of damages when it comes to delay damages:

●        Cost escalation.

●        Extended field overhead.

●        Additional materials stored.

●        Labor and equipment in idle state.

●        Loss of profit that was anticipated.

●        Unabsorbed home office overhead.

●        Additional costs of financing and bonding.

Based on the recommendation of construction claims experts and industry professionals, we will be discussing those that require urgent recovery.

Understanding Unabsorbed Home Office Overhead

Unabsorbed home office overheads are quite common. They are a bit complicated to understand. Like extended field overheads, they can be caused by a critical project delay. They can also be caused by a project’s duration being extended.

Home office overhead expenses are incurred for supporting construction work. Then again, they have no direct relation to expenses incurred for work on a certain project.

Home office ownership rental and expenses, corporate taxes, insurance costs (not assigned to a certain project), utilities, equipment and maintenance expenses of a home office, and salaries of staff are part of unabsorbed home office overheads.

Here are some formulas that can easily calculate the home office overhead costs:

●        The Allegheny formula.

●        The Canadian formula.

●        The Carteret forum.

●        The Eichel formula.

●        The fixed percentage approach.

Understanding a bit about extended field overhead expenses

Extended field overhead costs are also known as site overhead costs. It is a kind of delay caused by a core project delay or due to an extended project duration. These kinds of costs comprise of indirect expenses required to support construction field work. They are directly related to the job’s expenses. Here are some of its common components.

●        Field office rental expenses.

●        Field office staff vehicles rental or expenses.

●        Weekly and Monthly salaries of field office staff.

●        The field office’s consumables and utilities.

Expenses getting escalated

Expenses being escalated cannot be explained theoretically. But they can be explained through an example. Suppose a contractor’s work faced delays by a compensable delay from one period of agreement to another. This causes contractors to pay the workers a higher wage. This entitles them to additional compensation due to breach of contract rules.

There is also another example of such in the aspect of material acquisition aspect. If a compensable delay happened and the material expenses went up as a result, then damages can be sought.

The damages resulting are usually found by calculating the difference between the labor cost, of equipment or materials the contractor incurred and, If no delay happened, the actual expense of either equipment, labor, or materials. Also, if the contractor had to pay more for performing work later than the actual date of work, then that is also taken into consideration.

The escalation cost recovery for contractors is due to numerous factors. Yet it is often related to either a crucial delay or a project’s duration being extended.

Expenses of equipment and labor either idled or lying idle

These expenses are caused by either crucial or non-crucial delays, or by both. Damages because of idle equipment and labor can also be due to owners’ inefficiency to conduct operations, disruptions to work, and suspension of work caused by owners.

According to project advisory experts, contractors can recover additional costs of both equipment and labor (or either) by either a stop work order or during the waiting period when designs are being modified.