Prolongation Cost PDF

Project:
Job- 245
Subject : Cost Implication associated with second time extension claim
Dear Sirs,
Reference is made to the above subject and in continuation to our letter date 13th August
2007, and as per contract conditions clauses 53.1- 53.3 of contract conditions, we
hereby submit our detailed substantiation of our financial cost Impact of time extension
claim as follows :
Basic Data :
-
The total overall incurred delays: 207 Calendar days.

Contract Duration : 22 months 660 calendar days
Original Contract Amount : 388,000,000
Revised Contract Amount:
406,925,278.22 Dhs
that comprises:
Fixed Items Value:
355,615,610.29 Dhs
Provisional Sums :
51,309,667.93 Dhs
Average Daily Cost in Delay Period =

FINANCIAL CLAIM
** Prolongation Costs for the Delay Period (207 Calendar Days) are:
A- Extended preliminaries for 207 days
= AED7,803,170.26
As per attachment#1
B1- Extended Insurance policies & Bonds
= AED 350,000
B2- Finance Charges on Delayed Release of Retention
= AED 1,624,000
B3- Finance Charges on Delayed and Extended Drawdown: = AED 821,110.23
B4- Head office extended overheads
= AED 1,996,865.70
B5- Extended construction Equipment Insurance
= AED 120,000
C- Indirect supervision cost

Wages Site Management staff
Labour
= AED 3,350,000
= AED 1,300,000
Page 1 of 5
D- Escalation formula due to extended time

= AED 687,500
E- Direct Cost Impact due to late release of power supply & monthly
running power supply cost
= AED 1,500,000
Total A+B+C+D+E
AED 19,748,961.40
As per attachment #2
We trust you will find the above to be in order and we assure you of our continuing cooperation and best endeavours at all times.
Very truly yours,
for Al Shafar General Contracting Co. L.L.C.
Page 2 of 5
1. Head Office Overheads and Profit:

This claim has been calculated in accordance with Hudsons formula. We shall have
to retain key staff and resources on site for an additional period of 207 calendar days
depriving us of making a contribution to head office overheads and profit had it been
free to demobilize and leave the project timeously. Our final claim shall be
determined on completion of the project based upon relevant previous trading
results.
Using Hudsons formula:
Head Office Profit / Overheads % * Contract Sum
Contract Period
10% * 355,615,610.29/660 *207 cal. Days
* period of delay
= AED 11,153,398.68
2. Finance Charges on Delayed and Extended Drawdown:

As a result of the said 207 calendar days delays, the financial drawdown of monies
is extended and delayed. Accordingly, we are incurring additional financing charges
by virtue of the fact that interest charges on our overdraft are accruing for this
delayed and extended drawdown.
Revised Contract Price P Sums = AED 355,615,610.29
Less Certified Gross for Works Status
7 July 2007 Excluding Provisional Sums
= AED 386,397,522.54
Balance to Drawdown as of 7 July 2007
= AED 20,527,755.68
Completion Extended Date of 5th February 2008

Drawdown Factor of 0.55
Prevailing Overdraft Rate of 8.0 % on AED (see attachment)
Financing Charges on delayed and extended drawdown are:
20,527,755.68 *8.0% *0.55 *(5 Feb 08 - 7 Jul.07) / 365 days
Page 3 of 5
= AED 514,712.38
3. Finance Charges on Delayed Release of Retention:

Pursuant to Sub-Clause 60.3 of General Conditions 5% of the Contract Price (being
one half of the Retention limit stated in the Appendix to Tender) should be certified
and paid upon issue of the Taking-Over Certificate and upon the issuance of the
Final Certificate pursuant to Sub-Clause 60.8 of General Conditions.
As a result of said delays we shall incur financing charges by virtue of the fact that
release of the retention monies will similarly be delayed. The finance charges are
calculated at the currently prevailing overdraft rates of 8.0 % on AED (as per Bank
charges) and will be recalculated and adjusted based on prevailing rates at the time
of issuance of the (a) Taking-Over Certificate and (b) Subsequent Final Certificate.
At this stage, the Retention limit has only been calculated on our Works and
excludes Retention on Nominated Sub-Contractors.
Amount of Retention:
Revised Contract Sum
= AED 406,925,278.22
10 % Retention Limit
= AED 40,692,527.82
Financing Charges on delayed release of retention monies due to said delays are:
40,692.527.82 * 8.0 % * (2 FEB.08 - 7 Jul.07) / 365 days = AED 1,855,133.32
4. Claims by Nominated Sub-Contractors:
We reserve our rights to claim and be financially reimbursed all claims that we may
receive from our Nominated Sub-Contractors, which will be forwarded on to you for
consideration under separate covers.
Summary of Loss and/or Expense:
The following sums are claimed pursuant to Clause 53 of the General Conditions of
Contract:1. Prolongation Costs
AED : 20,076,118.56
2. Contribution to Head Office Overheads and Profit
AED : 11,153,398.68
3. Finance Charges on Delayed / Extended Drawdown
AED : 514,712.38
4. Finance Charges on Delayed Release of Retention
AED : 1,855,133.32
Grand total claimed value
Page 4 of 5
AED 33,599,362.94
We trust you will find the above to be in order and we assure you of our continuing cooperation and best endeavours at all times.
Very truly yours,
for Al Shafar General Contracting Co. L.L.C.
_____________
Project Manager
Page 5 of 5
Associated Constructions & Investments Co. LLC

5B+G+39 RESIDENTIAL, COMMERCIAL and OFFICE TOWER ON PLOT C2
JUMEIRAH LAKE TOWERS, DUBAI for Messrs STAR GIGA ESTABLISHMENT
Contractors Entitlement to an Interim Extension of Time and the Associated Costs, Loss and Expense
DELAY EVENT Nr. 5 NOMINATION OF SUB-CONTRACTORS AND PC SUMS
DELAY EVENT Nr. 5

1. CONTRACT PARTICULARS
Delay Event Nr. 5
Associated Constructions & Investments Co. LLC

5B+G+39 RESIDENTIAL, COMMERCIAL and OFFICE TOWER ON PLOT C2
JUMEIRAH LAKE TOWERS, DUBAI for Messrs STAR GIGA ESTABLISHMENT
Contractors Entitlement to an Interim Extension of Time and the Associated Costs, Loss and Expense
DELAY EVENT Nr. 5 NOMINATION OF SUB-CONTRACTORS AND PC SUMS
DELAY EVENT NR. 5

2. INTRODUCTION AND EXECUTIVE SUMMARY
Delay Event Nr. 5

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Project:

Subject : Cost Implication associated with second time extension claim

The total overall incurred delays: 207 Calendar days.

Revised Contract Amount:

Fixed Items Value:

Average Daily Cost in Delay Period =

B5- Extended construction Equipment Insurance

C- Indirect supervision cost

D- Escalation formula due to extended time

1. Head Office Overheads and Profit:

2. Finance Charges on Delayed and Extended Drawdown:

Balance to Drawdown as of 7 July 2007

Completion Extended Date of 5th February 2008

3. Finance Charges on Delayed Release of Retention:

2. Contribution to Head Office Overheads and Profit

3. Finance Charges on Delayed / Extended Drawdown

4. Finance Charges on Delayed Release of Retention

Grand total claimed value

Associated Constructions & Investments Co. LLC

DELAY EVENT Nr. 5

Delay Event Nr. 5

Associated Constructions & Investments Co. LLC

DELAY EVENT NR. 5

Delay Event Nr. 5

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