Comprehensive Guide

Construction Claims Management: From Documentation to Resolution

A practical guide to preparing, documenting, and presenting construction claims — covering EOT claims, variation orders, disruption claims, acceleration claims, and the financial quantification methods used to calculate prolongation costs.

By Constroma Team·20 min read

Types of Construction Claims

Construction claims arise from events that change the scope, cost, or duration of a project beyond what was originally agreed. The main categories are:

Extension of Time (EOT) Claims: Requests to extend the contractual completion date due to qualifying delays. The contractor must demonstrate that the delays impacted the critical path and that proper notice was given.

Variation / Change Order Claims: Claims arising from changes to the scope of work directed by the employer. These may include both the direct cost of the changed work and any consequential time and cost impacts.

Disruption Claims: Claims for loss of productivity caused by employer actions or interference. Unlike delay claims, disruption claims address increased costs for the same scope of work, not additional time.

Acceleration Claims: Claims arising when the contractor is directed (or constructively required) to complete the project faster than the contractual schedule allows, resulting in additional costs.

The Claims Process

Step 1 — Notice: Give written notice of the delay or disruption event within the contractual time limit. This is the most critical step — late notice can bar the entire claim.

Step 2 — Documentation: Record everything contemporaneously: daily reports, photographs, correspondence, meeting minutes, weather records, and delivery logs. The strength of a claim depends on the quality of supporting documentation.

Step 3 — Schedule Analysis: Perform delay analysis to demonstrate the critical path impact of each delay event. Use Time Impact Analysis or Windows Analysis for the most defensible results.

Step 4 — Financial Quantification: Calculate the costs associated with the delay or disruption: prolongation costs (site overhead, head office overhead), acceleration costs, variation costs, and any financing charges.

Step 5 — Presentation: Compile the claim narrative linking cause (delay events) to effect (schedule impact) to damages (financial cost). The claim should be clear, logical, and fully traceable.

Prolongation Cost Formulas

Head office overhead during periods of project prolongation can be calculated using established formulas:

Eichleay Formula (common in US): Allocates a portion of total head office overhead to the delayed project based on billings ratio, then divides by project duration to get a daily rate.

Hudson Formula: Uses the head office overhead percentage from the contract tender to calculate recoverable overhead during the delay period.

Emden Formula: Uses actual overhead data (from audited accounts) rather than tender percentages, making it generally more defensible than Hudson.

Best Practices

Keep a contemporaneous delay register from day one. Track every potential claim event with dates, descriptions, and supporting references. Maintain proper schedule updates throughout the project. Give notices on time, every time — even if you think the issue will resolve itself.

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Frequently Asked Questions

What is the most common type of construction claim?
Extension of time (EOT) claims are the most common. They arise when delays outside the contractor's control push the project beyond the contractual completion date. EOT claims require documentation of the delay events, schedule analysis showing critical path impact, and compliance with contractual notice requirements.
What is the difference between a delay claim and a disruption claim?
A delay claim addresses the extension of the project duration — the contractor seeks additional time (and potentially prolongation costs). A disruption claim addresses loss of productivity — the contractor performed the same scope of work but at higher cost due to interference. The two can occur simultaneously on the same project.
What are prolongation costs?
Prolongation costs are the additional time-related costs incurred because the project took longer than planned. They typically include site overheads (site management, facilities, equipment), head office overhead (calculated using formulas like Eichleay or Hudson), and financing costs. Prolongation costs are recoverable when the delay is compensable.
How important is the notice requirement?
Critical. Most construction contracts require the contractor to give written notice of delay events within a specified period (often 28 days). Failure to give timely notice can result in the claim being time-barred, even if the delay was entirely the employer's fault. Always track contractual notice deadlines carefully.