Thursday, July 3, 2008

Extension of Time, EOT

Extension of time is not a strange word for a Quantity Surveyor. When we say this, we will automatically link the EOT to the following:-

a) Additional preliminaries which the Contractor will be entitled to
b) Amended Completion Date
c) Liquidated damages

Recently, the Contractor of my project claimed for 4 months EOT with over 30 million USD claim for additional associated cost. It was a surprise to us as a Consultant while the project has just started for 1 year and still have 2 years to go. Well, the most surprise thing is the monetary claim of USD 30 million. Therefore, what I intend to write on this post is relating to the monetary claim associated with EOT - we referred it as compensation due to prolongation.

As normal, it would put it in question and answer form as it is a better way to illustrate.

Question: Will be Contractor be automatically entitled to compensation due to prolongation when EOT is granted to him?

Answer:
NO. Entitlement to an EOT does not automatically lead to entitlement to compensation and vise versa. Contractor will only be entitled to compensation if EOT is granted because of the delay is caused by the Employer. The Contractor will not be entitled to compensation if the EOT is granted due to force majeure, as per the conditions of contract. There may be other reasons which the Contractor can be granted EOT but not for monetary compensation which will be stated in the conditions of contract.

Question: Will be Contractor be entitled to compensation due to prolongation for concurrent delay (where Contractor Delay to Completion occurs or has effect concurrently with Employer Delay to Completion)?

Answer:
If the Contractor incurs additional costs that are caused both by the Employer Delay and concurrent Contractor Delay, then the Contractor should only recover compensation to the extent it is able to separately identify the additional costs caused by the Employer Delay from those cause by the Contractor Delay. If it would have incurred the additional costs in any event as a result of Contractor Delays, the Contractor will not be entitled to recover those additional costs.

Question: What is the basis of calculation of compensation for prolongation

Answer:
Compensation for prolongation shall be assessed based on work that actually done unless otherwise expressly provided in the contract (e.g. by evaluation based on contract rates). The objective is to put the Contractor in the same financial position it would have been if the Employer Risk Event had not occurred.

Question: When is the period for evaluation of compensation

Answer:
It should be evaluated as soon as possible when the Employer Risk Event was felt. The evaluation is not recommended to be done only the the end of the contract as will be difficult to assess the effect at that time if no proper records have been kept.


Having other questions? Feel free to write down some so that we can discuss together.

8 comments:

Unknown said...

My husband is thinking about building a new building for his business and I want him to get help dealing with the contractor. I really like what you said about extension of time not resulting in compensation to the contractor. This is something that I didn't know, and it makes me think that hiring a quantity surveyor would be a helpful option. Thank you for sharing.

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