The heads of a loss and expense claim

Where a relevant matter causes the contractor to incur loss or expense that would not be reimbursed under any other provision of the contract, JCT provides for it to be ascertained and added to the contract sum.

Three words in that sentence carry the weight. Relevant matter, which is a closed list. Ascertained, which means calculated from evidence rather than estimated. And loss or expense, which means money actually lost or spent, not opportunity foregone.

The recognised heads

• Prolongation. Time-related site costs incurred over the extended period: site management, accommodation, welfare, plant on hire, insurances.
• Disruption. Loss of productivity on work that still had to be done, but took longer or cost more because of the way it was affected.
• Head office overheads. The contribution to fixed overheads that the delayed resources could not earn elsewhere.
• Finance charges. The cost of financing the loss until it is reimbursed.
• Increased preliminaries and thickening. Additional supervision or management resource brought in because of the disruption.
• Claim preparation costs. Recoverable in limited circumstances, and often not at all.

Prolongation is not a rate

The commonest error is calculating prolongation by taking the tendered weekly preliminaries and multiplying by the weeks of delay.

That is not the loss. The tendered rate is what the contractor hoped to spend. The claim is for what was actually incurred during the delay period, which may be more or less, and which has to be evidenced from the accounts.

The period also matters. Prolongation costs are generally assessed over the period when the delay actually occurred, not over the extension tacked onto the end of the programme. Those are different weeks with different costs on site.

Head office overheads

The theory is that resources tied up on a delayed project could have earned a contribution elsewhere. Formulae exist for calculating it, and they are widely used and widely criticised.

Whichever formula is used, it usually needs support for the underlying proposition that other work was actually available and was actually lost. Applying a formula to a company that had no other work to take is arithmetic without a claim underneath it.

Global claims

A global claim rolls all the causes and all the loss into a single figure without linking cause to effect. They are not automatically fatal, but they are treated with suspicion, and the risk is that failure of any part undermines the whole.

Where individual causation can be shown, it should be. Where genuinely it cannot, the claim should say so and explain why, rather than presenting a lump sum as though causation had been established.

The evidential burden

It sits with the contractor, entirely. Cost records, site records, allocation sheets, the programme as it stood, and the notices as they were given.

Ascertained means the certifier works it out from evidence. It does not mean estimated, and a claim that provides no basis for ascertainment invites an ascertainment of nil, which is a defensible outcome.