Ascertainment of loss and expense

There is a link between loss and expense (or additional cost for delay) and disruption and extensions of time, although the link is not so close as many believe. See City Inn Ltd v Shepherd Construction Ltd [2010].

If an architect or engineer grants an extension of time on grounds that also attract loss and expense or additional cost, then that loss and expense or additional cost will usually be ascertained or determined for that period. However, it must be recognised that loss and expense or additional cost may go beyond just the costs of keeping the site open. Disruption may also feature under the same head of claim.

Under JCT Standard Building Contract With Quantities 2011 (JCT 2011), when valuing loss or expense associated with a delay to works, these amounts must be proven as actual losses or expenses. For this purpose, bill rates should not be used. When valuing additional preliminaries that can be attributed to specific instructions, these may be valued at bill rates. Under the Institution of Civil Engineers (ICE) Conditions of Contract Measurement Version (7th edition), such additional preliminaries arising out of the engineer's instructions should be valued according to bill rates adjusted as appropriate (see clause 52(3)).

Under both the JCT 2011 and ICE 7th edition contracts, the matters facilitating reimbursement of additional cost are different from the events facilitating an extension of time.

Under either set of conditions, a contractor may have been delayed by an employer, but need not be entitled to an extension of time (if, for example, the contractor would otherwise have finished early). Under these circumstances, the contractor would, however, still be entitled to loss and expense or additional cost.

When ascertaining or determining the costs of increased preliminaries for prolongation, it is common practice to use the amounts in the contract bills proportioned to the length of the delay. Depending on the circumstances, this may be correct under the ICE 7th edition and under the provisions of clause 5.6.3 of the JCT conditions. Where the bill rates are not to be used, the actual cost to the contractor of the additional preliminary items is the correct basis of ascertainment or determination, and full details of such costs must therefore be provided by the contractor.

From the principles discussed above, it will be apparent that the actual cost incurred by the contractor because of the delay is more likely to be incurred at the time of the delay than at the end of the contract (see Sections 4.2.3.2 and 4.5.3 of the old Surveyors' Construction Handbook).

For a full discussion of this aspect, see Extensions of time.