Understanding the Real Cost of Delays on Your Construction Project

Unfortunately many construction projects run late due to circumstances caused by the client or their agents. Some reasons for these delays were discussed in a previous post. Pricing the full cost of delays can be difficult and often the full impacts are only understood by the contractor after their delay claim has been submitted and accepted by the client.

Below are some items to consider when compiling your next construction delay claim.

The delay could result in:

1.        The contract schedule being extended, meaning that the contractor remains on site longer than allowed for and incurs additional costs for:

a.        Their construction site facilities

b.        Management and supervisory staff salaries and their associated costs

c.         The extension of the bonds, sureties and insurances

d.        Equipment such as cranes

2.            The inefficient and unproductive use of personnel and equipment which:

a.        Cannot be used at all while they are waiting for access or information

b.        Are only partly utilised since they may only have limited access to work areas

3.            The work moving into a season with unfavourable weather conditions (wind, extreme cold, heavy rain), which wasn’t allowed for in the schedule or                            tender, causing further delays and inefficiencies

4.            Material prices increasing in the interim

5.            The activity happening when other contractors are working in the area which then adversely impacts productively

6.            An activity being undertaken out of sequence which may result in:

a.        Access being limited due to other work around it being completed

b.        The work area becoming congested due to other activities happening simultaneously

c.         Specialist equipment, subcontractors or personnel not having continuity of work resulting in them having to return to site at a later date entailing                              additional mobilisation costs (in some cases the equipment or subcontractors may not be available when they are required again, which could result                           in further delays)

d.        Damage to works already completed

7.            Materials which have been ordered having to be stored because the site isn’t ready to use them, resulting in storage costs and double handling, and the                     associated risks of damage and theft

8.            Disruption of cash flow because the project’s end date is extended, deferring the release of retentions and securities

9.            Subcontractors are delayed resulting in them claiming delay costs

Furthermore, staff and equipment are unable to move to the next profitable construction project – meaning the company probably loses potential profits, or that project starts late or is under-resourced causing problems on that project.

Many of these costs are difficult to demonstrate and prove to the client. Frequently, clients don’t understand the consequences of their actions. Construction companies should do whatever they can to ensure the client delivers access and information in accordance with the schedule requirements so the project isn’t delayed. There are seldom winners when construction projects are delayed.

Of course in some cases the contractor is responsible for the delays. They not only then face paying client enforced damages or penalties, but they also incur all their own costs associated with the delay

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