On-Site expenses due to extended stay
These expenses represent the actual costs incurred as a result of an extended stay at the site. The following steps are followed to assess such prolonged on-site expenses:
- Identify actual costs: Gather all actual costs incurred during the project by reviewing sources such as the project cost ledger, invoices, bank statements, timesheets, and ERP systems.
- Categorize costs: Classify the costs based on the standard or existing accounting practices typically followed in construction projects.
- Segregate costs: From the categorized costs, distinguish between direct and indirect costs (time-related and non-time-related). Further, exclude all direct costs from this analysis.
- Calculate time-related indirect costs: Identify time-related indirect costs over the entire project period and compute the per-day time-related costs for each month or defined delay window period.
- Determine extended stay costs: Multiply the calculated per-day time-related indirect costs by the number of delay days for each delay window to determine the extended on-site expenses.
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What is meant by 'prolongation' in construction contracts?
Prolongation refers to the extension of the project duration beyond the originally agreed timeline, typically due to delays. When this happens, the project is in a “prolonged period,” and associated additional costs are known as prolongation costs.