Everyone knows how delays can be disturbing. They can have consequences no one wants to bear. The field of construction is complex, and delays that extend construction projects can have serious financial implications for each person involved. Architects, engineering firms, contractors, and construction companies, all get stuck if there is a delay.
These financial consequences can have both positive and negative financial results for owners, contractors, architects/architectural firms, and engineering firms. It usually is dependent on the cause, effect, and liability for the delay(s).
Construction contracts often contain certain provisions for project owners when it comes to late delivery of projects. These are usually known as liquidated damages.
What kinds of delay factors in construction are present?
For many contractors, construction contracts contain provisions for time extensions due to delays created by unforeseeable issues. However, compensation does not necessarily have to be the cause of the delay in the project.
There are two kinds of delay factors namely Excusable delays and Compensable delays. Excusable delays are usually caused by factors like weather, natural disasters, and other natural acts beyond human control.
Whereas, compensable delays are caused by other parties or influences which were often not foreseen by the contractor when the contract was signed(i.e. when the contract is being signed). Examples are changes in design, extra work orders, stoppages in work, contract modifications, etc.
Contractors should be able to demonstrate that the cause, effect, and liability for such delays can be attributed to other parties that are part of the contract if they want to recover from such damages.
The kinds of damages that contractors can recover from
The following are the kinds of damages that contractors can recover:
- Extended field overhead.
- Unabsorbed home office overhead.
- Labor and equipment in idle state.
- Additional materials stored.
- Cost escalation.
- Additional costs of financing and bonding.
- Loss of profit that was anticipated.
Key ones will now be discussed with the aid of quantum analysis experts working at a well-known firm of construction claims in Dubai:x`
Unabsorbed Home Office Overhead
Such overhead is quite common and is quite a complex delay. Like the extended field overhead, it can be caused by a crucial project delay or extended project duration. Home office overhead costs are expenses incurred to support construction work. But they are not related directly to the costs of the work of a specific project.
These costs generally include the following:
- Corporate taxes.
- Home office ownership or rental costs.
- Home office utilities, equipment and maintenance costs.
- Insurance costs (those which cannot be assigned to a specific project).
- Home office staff salaries.
Construction claims experts reveal that the following formulas can easily calculate home office overhead:
- Eichel formula.
- Carteret formula.
- Canadian formula.
- Allegheny formula.
- Fixed percentage approach.
Extended field overhead
The extended field overhead is also referred to as site overhead. This is a kind of delay that can be due to a critical project delay or be present due to an extended project duration. Field overhead costs consist of indirect costs that are required to support work in the field and are not related directly to the job’s costs. Some of its common components are:
- Field office rental.
- Field office staff vehicles.
- Salaries of field office staff.
- Utilities and consumables of the field office.
Expenses of idle equipment and labor
Costs for them are caused by both crucial and non-crucial delays. Damages due to idle equipment and labor can also rise from inefficiency created by owners plus any and all disruptions and suspensions from the owners’ side as well.
Contractors are entitled to recover additional costs of labor or equipment stopped through either a stop work order or during the period waiting for any designs to be modified. Such a suspension does not necessarily require a critical delay for the contractor to be entitled to payment for such an overhead.
Cost escalation
If a contractor’s operation got delayed by a compensable delay from one labor agreement period to another, causing the contractor to pay a higher hourly wage, then they can be entitled to additional compensation. This is known as cost escalation Chicago SEO Company.
A contractor’s recovery of escalation damages can be caused by various factors. However, it is usually related to either a crucial delay or a project’s duration getting extended beyond the margin.
