Counting Cost of Delay & Disruption | Article | FTI Consulting

Counting the Cost of Delay & Disruption

How are Costs Assessed and What Records You Should be Keeping?

Construction Solutions

March 7, 2017

construction

Delay and disruption are endemic throughout the entire building and construction industry and lead to time and cost overruns. In this article, we discuss why identifying delays and/or disruptions early and good record keeping are essential in effectively managing corrective action, quantifying financial impacts and demonstrating liability.

Delay and Disruption – The Distinction

Delay is time related and disruption is productivity and/or production related. A delay may cause disruption, disruption may cause delay, and both often occur at the same time.

Loss Caused By Delay

A contractor’s claim for further payment as a result of delay is typically made under the following heads:

Direct additional construction costs: A contractor will usually incur additional site labour costs for working over a longer period, overtime and/or on multiple shifts.

Site overheads: Often referred to as preliminaries or indirect job costs, these relate to items such as site huts, toilets, and equipment and plant items used to carry out the work. When work is delayed, the contractor may incur additional costs to keep these items onsite for longer. If contract terms permit, the valuation of these claims will be based on agreed rates for site overhead items in the contract. However, most often, a claim for additional payment is based on a loss and expense or a damages assessment and is calculated based on the actual additional costs incurred. This information generally comes from the contractor’s cost account and/or cost records.


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