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(EST-1104) Pricing Contractor Delay Costs

Primary Author: Mr James G Zack Jr CFCC Navigant Consulting, Inc.
Co-author(s): Mr Peter V. Badala Navigant Consulting, Inc.

Audience Focus: Advanced
Application Type: Experience-Based
Venue: 2012 AACE International Annual Meeting, San Antonio, TX, USA

Abstract: When contractors encounter owner caused (excusable/compensable) delay they are typically entitled under the contract to recover both the time resulting from the delay as well as delay damages. Idled equipment/labor and material escalation costs are fairly easily calculated in such situations. Typically, contractors also seek to recover their delay costs (extended field office overhead or general conditions costs) also. Calculating this cost is more complex than dealing with delayed direct costs. There are, at least, eight methods of calculating extended field office overhead costs. None of the calculations arrive at the same daily delay cost. This paper discusses all eight methods - offering commentary on the strong and weak points of each. The paper also offers a recommendation on how project owners can resolve this dilemma in advance of delays, thus making the issue less contentious should a contractor encounter an owner-caused delay.