Construction professionals, and especially construction contractors, are quite familiar with these two types of claims (prolongation and disruption claims) as these are fundamentally acting as a means of claiming compensation to contractors for losses incurred during construction. These claims largely address damages arising distinctively.
A prolongation claim is associated with delays to the project completion and in other words, it is a claim to capture all time-related costs arising when the project timeline was critically affected by an event for which the principal is responsible. In a nutshell, a prolongation cost claim is a claim for delay costs.
On contrary, the Disruption claim is associated with a disruption to the regular and/or planned progress of the works. SCL defines the Disruption claims that “…Disruption (as distinct from delay) is a disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency…” Clive indicates that “if (disruptions) caused by the Employer, it may give rise a right to compensation either under the contract or as a breach of contract…”
Keating on Construction Contracts cited in Clive distinguishes these claims by stating the following:
“A distinction should be made between prolongation claims (involving costs and losses incurred as a result of delays to the activity in question or the works as a whole which have led to critical delay to the contract completion date) and disruption claims (which involve those additional cost and losses incurred during extended or disrupted periods of activities usually without any effect on the completion date for the works…”
The prolongation cost claim although associated with delay claims, all delay claims do not give a right to the contractor to claim for prolongation costs. Logically and contractually, the contractor is not entitled to claim additional costs for delays caused due to their default. Similarly, damages arising from an extension of time awarded due to neutral risks would not provide any entitlement to the Contractor to claim prolongation costs as parties are responsible to bear their costs resulting from such risks (e.g., environmental risks/weather and natural disaster, etc.).
It is better to have a comprehensive understanding of the necessary elements that are to be justified for a claim to be successful, including an understanding of ins and outs of delay claims are essential to make a claim properly and to defend against any challenges. The main type of delay claims includes (i) critical v non-critical; (ii) excusable vs. non-excusable; and (iii) Compensable Vs. non-compensable. Out of these, the prolongation cost claim is predominantly possible for a contractor to be entitled are in the context of a delay which is critical also excusable, and compensable.
When it comes to a type of loss, it is also necessary to understand, how the money is being paid to the contractor when work is completed. The payment to the contractor is based on the works carried out plus its on-site overhead (i.e., preliminaries – including site management staff, site huts, etc.). Also, head-office overhead and profit will be paid. On this basis, the overall cost is the combination of works cost (called direct costs) and the site and head-office overhead costs plus profit (called indirect costs). In a nutshell, the direct cost is related to work costs whilst the indirect costs are related to time.
Any loss arising from the time-related cost, i.e., the additional time-related costs that are required for the contractor to remain on the site beyond the planned duration (i.e., original contract duration) is called prolongation cost.
Any loss arising from the work-related cost, i.e., the additional costs that are required for the contractor to complete the works beyond the estimated cost. The additional cost is the result of productivity loss that occurred from the loss of efficiency. The loss of efficiency is a qualitative measurement. Efficiency measures the ability to achieve productivity. Disruption claim is relevant to claim losses arising from the work cost resulting from productivity loss caused by efficiency loss.
NSW Government, Construction Procurement Guide: Handling Prolongation and Disruption Claims, (Dec 2018)
Society of Construction Law, “Delay and Disruption Protocol, 2nd edition (Feb 2017)
Clive Holloway, Construction: Methods of Assessing Disruption Claims, FTI Consulting, 02 Nov 2020
See no. 3, above
