Construction Law/Idle Cost Claim
Please comment, what type of method(s) shall be used for calculation of delay cost claim?
Is it logically not correct to use Day Work Schedule for Labour and Equipments rates, in respect of calculation of idle cost claim? Because these rates are given in the contract.
Is it necessary to use Construction Equipment Ownership and Operating Expense Schedule of U.S. Army Corps of Engineers for idle equipment cost claim?
Thank you for your questions regarding method(s) shall be used for calculation of delay cost claim and like to respond in a general manner in following paragraph.
Generally, the method for calculating the claim or damages is based on the type of claim or focus on liability. There are two basic theories of liability: contract or tort. A breach of contract can be material (total or partial). The extend of the breach determines the measure of damages. A tort is generally a civil wrong which entitles the wronged party to damages. A claim that a contractor was negligent in performing a certain act can be the basis for tort liability.
The calculation of delay claims by Contractor and by the Employer have 02 separate basis and hence different in approach. When the contractor delays the project the owner can recover one of two types of damages: liquidated damages or actual damages. When the Employer delays,the components of a contractors delay claim include: (1) indirect costs that occurred during the extended performance period, (2) home office overhead that was incurred during the extended performance period, (3) increased (material escalation) material direct costs that occur during the delay (4) lost productivity caused by the delay and (5) other damages directly related to and attributable to the delay. The normal practice is that day work rates, though given in the contract, are not used in the valuation of variation unless so instructed by the Engineer and rate is not easily agreeable due to the variant nature of the varied work involved. Also the day work basis rates are for smaller quantum and hence on higher side and make them in eligible for scope of work which is substantial. In my opinion it is not essential to use US Army Corps of Engineers rates unless specified in the contract and / or an equivalent satisfactory rates to both parties are available. In my view, you can use locally available rates for hiring and operating equipment if such companies are operating in the area and in case it is Contractor's own equipment, the only accepted method is to divide the cost of the equipment by the quantum of useful working life of the equipment in hours like for example 10,000 hours etc.
I hope I have answered your question but if not please come back with specific query still remaining.