Delays in construction projects are inevitable, but do you know how to accurately assess and claim prolongation costs when they occur?
From excusable delays to concurrent delays, the type of delay determines whether a contractor is entitled to an extension of time (EOT) or compensation.
But it doesn’t stop there—prolongation costs can include everything from extended on-site expenses and unabsorbed overheads to loss of profit opportunities and financing charges.
For a deeper dive into the intricacies of prolongation costs and how to navigate them, check out this insightful article by Rohit Jaiswal, Delay & Expert at Masin.
https://lnkd.in/gjj3KPiu
How to Calculate Liquidated Damages (LD) in Construction Projects
Liquidated Damages (LD) are pre-agreed amounts payable by the Contractor for delays in project completion. Here’s how to calculate them step by step:
Check the LD Clause
Example: “1% of the Contract Price per week of delay, capped at 10%.”
Confirm the Contract Price
Contract Value = USD 50,000,000
Determine Revised Completion Date: Include approved Extensions of Time (EOT).
Revised Completion = 30 June 2025
Identify Actual Completion Date
Actual Completion = 10 August 2025
Calculate Delay Duration (Delay = Actual – Revised)
10 Aug – 30 Jun = 6 weeks delay
Apply the LD Formula (LD = (Delay Weeks × % per Week × Contract Value
LD = 6 × 1% × 50,000,000 = USD 3,000,000
Check the Maximum Cap
Cap = 10% × 50,000,000 = USD 5,000,000
Since 3,000,000 < 5,000,000 → Full amount is payable
The draft final account of a construction project is a useful mechanism in maintaining cost control of a project.
It should be commenced as building works begins and be updated accordingly.
Remeasurements, variation, rework and claims should be captured as they occur.
More often than not, many professionals working in the construction industry have found themselves confused when tender results show a range rather than the expected close prices. For instance, in response to a request for a proposal, three tenderers submitted their offers of $3 million, $1.5 million, and $5 million. Additionally, it is a common practice to include contingency amounts, whether as a lump sum or a fixed percentage (e.g., $1 million or 5%), in cost estimates based solely on expert judgment. Yet, when it becomes evident that these contingencies are insufficient to ensure project completion, tough questions may be raised by top management. These questions could revolve around the adequacy of the contingencies, whether all potential risks have been adequately covered, the confidence level in contingency determination, and the plan in terms of contractual arrangements to ensure that contingency costs can be expended in a fair and reasonable manner.
In the video below, I will discuss the risk assessment approach broadly adopting by the construction industry to quantify the construction contingency. Toward to the end of the video, I also demonstrate how to use Excel and Primavera Risk Analysis to establish contingencies for a residential project and a simple construction project at the brief and tender stage, respectively.
https://lnkd.in/gCKH5wBb
Delays, cash flow pressure, and payment issues have challenged construction sector — testing trust between contractors, subcontractors, and suppliers.
Now, with a new boom and major handovers expected between 2026–2028, the question is simple:
Will the same challenges return, or has the industry truly learned from the past?
#DubaiConstruction#RealEstate#UAE#ProjectManagement#Contracting#RamazIssahttps://lnkd.in/dQrctfMp
Construction delay claims are common disputes in the industry. They arise from unforeseen events that extend project timelines or prevent original plans from being executed. Common causes of schedule delays include:
Understanding Direct & Indirect Costs in Construction
In construction cost management, knowing the difference between direct and indirect costs is crucial for accurate budgeting and avoiding overruns.
➡️ Direct Costs
These are expenses that can be directly tied to a specific construction activity or component.
✅ Example: Concrete, steel, doors, windows, brickwork labor, and subcontractor works.
➡️ Indirect Costs
These are necessary to deliver the project but cannot be traced to a single activity. They are spread across multiple tasks.
✅ Example: Site office rent, utilities, insurance, permits, project management salaries, and security.
Industry Insight: On average, indirect costs vary between 15% to 25% of the direct cost. Failing to account for them can lead to significant cost overruns, studies show that incomplete indirect cost planning contributes to a significant budget overruns in construction projects.
Why It Matters
→ Ensures realistic budgets from the start
→ Reduces risk of unexpected expenses
→ Improves cash flow forecasting
→ Supports competitive yet profitable bidding
32% of contractors lose money on projects because they underestimate indirect costs (ConstructIQ 2024).
If you’re only pricing direct costs, you’re missing 15-25% of your true expenses and risking massive losses.
Tip: Always break down your estimate into both direct and indirect costs, overlooking the latter can turn a winning project into a financial strain.
#costumbrella#bidding#technocommercial#tendering#directcost#indirectcost#quantitysurveying#bidmastery25posts#CostPlanning
Understanding Direct & Indirect Costs in Construction
In construction cost management, knowing the difference between direct and indirect costs is crucial for accurate budgeting and avoiding overruns.
➡️ Direct Costs
These are expenses that can be directly tied to a specific construction activity or component.
✅ Example: Concrete, steel, doors, windows, brickwork labor, and subcontractor works.
➡️ Indirect Costs
These are necessary to deliver the project but cannot be traced to a single activity. They are spread across multiple tasks.
✅ Example: Site office rent, utilities, insurance, permits, project management salaries, and security.
Industry Insight: On average, indirect costs vary between 15% to 25% of the direct cost. Failing to account for them can lead to significant cost overruns, studies show that incomplete indirect cost planning contributes to a significant budget overruns in construction projects.
Why It Matters
→ Ensures realistic budgets from the start
→ Reduces risk of unexpected expenses
→ Improves cash flow forecasting
→ Supports competitive yet profitable bidding
32% of contractors lose money on projects because they underestimate indirect costs (ConstructIQ 2024).
If you’re only pricing direct costs, you’re missing 15-25% of your true expenses and risking massive losses.
Tip: Always break down your estimate into both direct and indirect costs, overlooking the latter can turn a winning project into a financial strain.
#costumbrella#bidding#technocommercial#tendering#directcost#indirectcost#quantitysurveying#bidmastery25posts#CostPlanning
Understanding Direct & Indirect Costs in Construction
In construction cost management, knowing the difference between direct and indirect costs is crucial for accurate budgeting and avoiding overruns.
➡️ Direct Costs
These are expenses that can be directly tied to a specific construction activity or component.
✅ Example: Concrete, steel, doors, windows, brickwork labor, and subcontractor works.
➡️ Indirect Costs
These are necessary to deliver the project but cannot be traced to a single activity. They are spread across multiple tasks.
✅ Example: Site office rent, utilities, insurance, permits, project management salaries, and security.
Industry Insight: On average, indirect costs vary between 15% to 25% of the direct cost. Failing to account for them can lead to significant cost overruns, studies show that incomplete indirect cost planning contributes to a significant budget overruns in construction projects.
Why It Matters
→ Ensures realistic budgets from the start
→ Reduces risk of unexpected expenses
→ Improves cash flow forecasting
→ Supports competitive yet profitable bidding
32% of contractors lose money on projects because they underestimate indirect costs (ConstructIQ 2024).
If you’re only pricing direct costs, you’re missing 15-25% of your true expenses and risking massive losses.
Tip: Always break down your estimate into both direct and indirect costs, overlooking the latter can turn a winning project into a financial strain.
#costumbrella#bidding#technocommercial#tendering#directcost#indirectcost#quantitysurveying#bidmastery25posts#CostPlanning
Understanding Direct & Indirect Costs in Construction
In construction cost management, knowing the difference between direct and indirect costs is crucial for accurate budgeting and avoiding overruns.
➡️ Direct Costs
These are expenses that can be directly tied to a specific construction activity or component.
✅ Example: Concrete, steel, doors, windows, brickwork labor, and subcontractor works.
➡️ Indirect Costs
These are necessary to deliver the project but cannot be traced to a single activity. They are spread across multiple tasks.
✅ Example: Site office rent, utilities, insurance, permits, project management salaries, and security.
Industry Insight: On average, indirect costs vary between 15% to 25% of the direct cost. Failing to account for them can lead to significant cost overruns, studies show that incomplete indirect cost planning contributes to a significant budget overruns in construction projects.
Why It Matters
→ Ensures realistic budgets from the start
→ Reduces risk of unexpected expenses
→ Improves cash flow forecasting
→ Supports competitive yet profitable bidding
32% of contractors lose money on projects because they underestimate indirect costs (ConstructIQ 2024).
If you’re only pricing direct costs, you’re missing 15-25% of your true expenses and risking massive losses.
Tip: Always break down your estimate into both direct and indirect costs, overlooking the latter can turn a winning project into a financial strain.
#costumbrella#bidding#technocommercial#tendering#directcost#indirectcost#quantitysurveying#bidmastery25posts#CostPlanning
Public Sector Construction Contract Administrators Society
Last night (October 3, 2025), a meeting of experts was held via Zoom to consider issues related to public sector construction contract administration.
The meeting involved extensive discussions, exchanging opinions on various cases that arose from a seminar at Sripatum University on September 27, 2025.
Additionally, there was an exchange of views on several other issues concerning the problems and obstacles in the administration of public sector construction contracts and construction projects.
During this meeting, the Secretariat (Construction Lawyers Society) reported that approximately 70% of the book "Guidelines for Public Sector Construction Contract Administration" has been written and is expected to be completed in its entirety by October 18, 2025.
The meeting also resolved to name this group of experts the "Public Sector Construction Contract Administrators Society".
Valuable insights on prolongation costs. A crucial aspect of construction contracts that ensures fair and efficient project execution.