Are All Costs Incurred During a Delay Period Recoverable as Prolongation Costs?

construction and engineering disputes, one of the most common mistakes in delay and prolongation claims is assuming that every cost incurred during an extended project period automatically becomes a recoverable prolongation cost.

It does not.

A contractor may successfully establish an entitlement to an Extension of Time (EOT), but this does not necessarily establish an equivalent entitlement to recover every indirect or time-related cost incurred during that period.

The critical question is not simply when the cost was incurred, but why it was incurred.

The Problem With the Average Daily Cost Approach

A common methodology used in construction claims is to calculate the total project indirect costs recorded over a particular period, determine an average daily cost, and then multiply that daily rate by the number of days identified as compensable delay.

In simplified terms:

Average Daily Indirect Cost × Compensable Delay Days = Claimed Prolongation Cost

While this approach may provide a convenient starting point for quantification, it does not, by itself, establish causation.

The fact that a cost appears in the project accounts during the extended period does not necessarily mean that the cost arose because of the employer-responsible delay.

Some costs may have been incurred regardless of the delay. Others may relate to the contractor’s ordinary performance obligations, concurrent activities, contractor-responsible delay, inefficiency, or resources that would have remained on the project in any event.

Therefore, timing alone does not establish recoverability.

Applying the “But-For” Test to Prolongation Costs

A useful analytical approach is to apply a But-For Test to each material category of cost.

The question is:

Would this cost have been incurred in the same amount, at the same time, and for the same duration but for the relevant delay event?

If the answer is yes, there may be a significant causation problem.

The expenditure may simply represent an ordinary project cost that the contractor would have incurred irrespective of the employer-responsible delay.

If the answer is no, further analysis becomes appropriate.

For example, consider a project manager, site office, security team, temporary facility, equipment item or other project resource that would ordinarily have been demobilised at the end of the contractual completion period.

If a qualifying delay event required that resource to remain on the project for an additional period, the additional cost attributable to that continued deployment may potentially constitute a prolongation cost.

However, its presence on site during the delay period is not enough by itself.

The claimant should establish the causal connection.

What Should Be Established in a Prolongation Claim?

A properly substantiated construction prolongation claim should normally demonstrate more than the number of days of delay.

For each significant cost category, the analysis should address:

Causation: What specific delay event caused the additional expenditure?

Time linkage: During what period did that event actually cause the resource or cost to continue?

Counterfactual position: What would have happened to the resource or expenditure if the relevant delay had not occurred?

Actual cost: Was the expenditure genuinely incurred and supported by contemporaneous financial records?

Reasonableness: Was retaining the resource reasonable in the circumstances?

Allocation: Is the claimed amount properly attributable to the compensable event rather than other project activities or contractor-responsible delays?

No double recovery: Has the same expenditure already been recovered or included elsewhere in the claim?

These questions are particularly important when assessing site overheads, staff costs, equipment, temporary facilities, accommodation, utilities and other time-related project costs.

Extension of Time Is Not the Same as Prolongation Cost

This distinction is fundamental in construction claims.

An Extension of Time primarily concerns the contractor’s entitlement to additional time.

A prolongation cost claim concerns the financial consequences allegedly caused by the compensable delay.

Establishing that a project was delayed by 60 compensable days does not automatically establish that every indirect cost incurred during those 60 days is recoverable.

The 60 days identify the period within which additional costs may need to be investigated.

They do not, standing alone, prove the amount of those costs.

Example: Site Staff During an Extended Period

Assume that a project experiences a 90-day extension and the contractor continues paying a project manager throughout that period.

It would be tempting to claim the project manager’s entire 90-day cost as prolongation.

But a proper assessment asks a further question:

Would the project manager have remained employed on the project during those 90 days even without the employer-responsible delay?

If the manager would have remained because substantial original-scope works were still incomplete for reasons unrelated to the compensable event, the entire salary may not represent an additional cost caused by that event.

Conversely, if contemporaneous records establish that the manager would have been demobilised at the contractual completion date and remained solely because the compensable delay extended the project, the causal case for the additional cost becomes materially stronger.

This distinction can significantly affect the valuation of a delay claim.

Why Contemporaneous Records Matter

Successful claim analysis therefore requires more than accounting records.

Project records can help establish what resources were actually retained because of the delay and for how long.

Relevant evidence may include project programmes and updates, timesheets, payroll records, invoices, site diaries, resource schedules, equipment logs, correspondence, notices, demobilisation plans, progress reports and cost ledgers.

The objective is to connect the delay event → affected period → retained resource → actual additional cost.

That causal chain is substantially more persuasive than simply applying an average daily overhead rate across the entire period of delay.

The Correct Approach to Prolongation Cost Assessment

A more robust methodology is therefore:

Identify the compensable delay event → establish its actual impact on the project period → identify the resources or expenditures that continued because of that impact → determine the actual additional cost → verify causation and supporting records → exclude unrelated costs and double recovery.

This is fundamentally different from assuming that:

Delay Days × Average Daily Indirect Cost = Recoverable Prolongation Cost.

The latter may be useful as a calculation technique in appropriate circumstances, but the calculation cannot substitute for proof of causation and entitlement.

Conclusion

In construction claims, a cost does not become a prolongation cost merely because it was incurred during a period of delay.

The relevant inquiry is whether the cost represents an additional expenditure caused by the compensable delay event.

Accordingly, the number of compensable delay days defines the period in which additional costs may be examined, but it does not by itself establish their quantum.

For contractors, employers and consultants assessing construction delay claims, separating ordinary project expenditure from genuinely incremental prolongation costs can be decisive in determining the proper value of a claim.