Unfortunately, many construction projects run late due to circumstances caused by the Client or their agents. Contractors sometimes become excited by the thought of being able to submit a delay claim. Often, a contractor is relieved when a delay occurs, because it takes the pressure off of his staff on a fast-track project. It might seem like easy money. But is it really?
Pricing the full cost of delays on a construction project 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 items to consider when compiling your next construction delay claim.
The delay could result in:
1. The construction schedule being extended, meaning that the contractor remains on site longer than allowed for and incurs additional costs for:
a) Their construction site facilities (dumpsters, porta-johns, office and storage trailers, utilities, etc.).
b) Management and supervisory staff salaries plus their associated costs (travel, cell phones, vehicles).
c) The extension of the construction bonds, sureties and insurances.
d) Equipment such as cranes, and lifts which might be covered in their overhead costs.
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 utilized since they may only have limited access to some work areas.
3. The construction work moving into a season with unfavorable 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 construction activity happening when other contractors are working in the area which then adversely impacts productivity.
6. An activity/task 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) Specialized equipment, subcontractors or personnel not having continuity of work resulting in them having to return to site at a later date entailing additional mobilization 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 installed work, which in the interim have already been completed.
7. Construction 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 retention monies 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 the NEXT project.
Many of these costs are difficult to demonstrate and prove to the client. Frequently, clients don’t understand the consequences of their actions. Therefore, construction companies should do whatever they can to ensure the client delivers access and information in accordance with the construction schedule requirements so the project isn’t delayed. There are seldom winners when construction projects are delayed.
In addition, delays can be frustrating and demotivating to supervisors and workers who in most cases want to get the work done as soon as possible. I’ve had construction projects delayed at the start which resulted in workers standing idle. When we eventually could carry on with the construction works we found it difficult to get employees motivated and productive again.
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 as well as damage to their reputation.
All good reasons for construction companies to complete projects on time. Management of the Client is often the largest hurdle in staying on schedule, and ultimately on budget.