Prolongation Costs under FIDIC: overheads, preliminaries and actual cost evidence

Prolongation costs are one of the most disputed parts of FIDIC claims. Contractors often assume that if the project is extended by 90 days due to an Employer-risk event, they can automatically recover 90 days of site overheads and head office overheads.

In practice, the task is harder. The contractor must prove not only entitlement to time, but also which costs actually arose because of the compensable delay.

What prolongation costs are

Prolongation costs are costs linked to the contractor’s extended presence on the project because of an event not at the contractor’s risk.

They may include:

• site management staff;
• temporary facilities;
• site offices and utilities;
• supervision;
• security;
• insurance extensions;
• equipment standby or extended hire;
• project-specific overheads;
• in some cases, head office overheads if properly substantiated.

Each item must be linked to the affected period and supported by records.

EOT does not automatically mean payment

The article on EOT and delay analysis explains how to prove time impact. But entitlement to time and entitlement to money are separate questions.

The team must show:

1. which event gives a right to cost;
2. which period is compensable;
3. which resources had to be retained;
4. which costs were additional;
5. which costs would have been incurred anyway.

An EOT award does not automatically convert all costs in the EOT period into recoverable costs.

Actual cost evidence is stronger than abstract formulae

Head office overhead formulae may be used in some systems and circumstances, but international contract administration usually prefers actual evidence.

For site preliminaries, keep:

• payroll records for site management;
• invoices for site offices, utilities and security;
• equipment hire agreements;
• insurance endorsements;
• timesheets;
• allocation records;
• explanation why resources could not be demobilised;
• link to the affected period.

Head office overheads require even more care. It is not enough to say that head office “supported the project longer”. The claim must show actual management resources or explain how the prolonged project affected the ability to take other work.

Affected period is not always the end of the project

A common error is to calculate prolongation only over the final tail of the project. The compensable delay may occur earlier and later be absorbed, resequenced or overlapped by other events.

The correct question is: when did the compensable event actually extend use of resources?

It may be:

• a period of access denial;
• a period waiting for instructions;
• a resequencing window;
• extended supervision;
• a specific programme window, not the whole project tail.

Without time analysis, the period will be disputed.

Do not mix heads of claim

Prolongation claims are often weakened by mixing:

• prolongation costs;
• disruption and productivity loss;
• acceleration;
• variations;
• financing costs;
• loss of profit;
• idle resources.

Each category needs its own proof. Productivity loss is usually better analysed as a disruption claim, not hidden inside prolongation.

Practical evidence pack

A good submission usually includes:

1. Summary of entitlement.
2. Delay analysis and affected period.
3. Cost schedule by category.
4. Supporting records for each item.
5. Mitigation explanation.
6. Exclusions and deductions.
7. Reconciliation with accounting records.

A useful table is: cost item - period - cause - record - amount. It shows that the claim is not a global budget re-calculation.

FAQ

Can head office overheads be recovered?

Possibly, depending on contract, law, facts and evidence. They should not be claimed automatically.

What matters more: EOT or cost records?

Both. EOT proves time impact; cost records prove financial consequence.

Must mitigation be proved?

Yes. If the contractor could reasonably reduce cost and did not, the recoverable amount may be challenged.

Bridge Consult helps prepare cost substantiation for prolongation claims: affected period review, records matrix and reconciliation with actual costs.

Sources and further reading

• Society of Construction Law, Delay and Disruption Protocol, 2nd Edition, February 2017.
• World Bank, Contract Management: Practice Procurement Guidance, Second Edition, May 2024.
• FIDIC, Conditions of Contract for Construction, 2017 edition.
• See also: Disruption claims under FIDIC and Payments under Clause 14.