Seven-Month EOT Claim and the LD Deduction
A public-sector client signs a lump-sum contract for a 12-storey office tower: Rs 480 million, 18 months, liquidated damages of 0.1% of the contract sum per day capped at 10%, and a price-adjustment clause for labour and steel. At month 15 the contractor has achieved 62% progress and claims a seven-month extension of time. The claim cites late issue of client-supplied switchgear (4 months), 22 architect's instructions revising the façade (2 months), and a cement shortage (1 month). The contractor also claims prolongation overheads at 1.2% of contract sum per month and says the LD clause should not apply because 'the delays were not ours'. The client's project director wants to reject everything and deduct the maximum LD immediately. The architect's contemporaneous records show the façade revisions were mostly instructed after the contractor had already fallen behind on the structure.
1. Assess the EOT claim event by event and explain the method you would use.
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I would use a time-impact analysis tied to the accepted programme, not a simple addition of durations. For the switchgear, I would check when it was required by the programme, when it was actually issued, and whether that activity controlled completion; if it did, up to four months may be employer-risk delay. For the façade revisions, the records show the contractor was already behind on structure before most instructions, so the two months cannot be granted in full; I would test each instruction for criticality and concurrency. The cement shortage is normally a contractor's procurement risk unless the contract treats it as force majeure or the client instructed a specific source. My provisional view is that entitlement is closer to four months than seven, but I would issue a determination with reasons, not a unilateral rejection. I would also require the contractor to update the programme and show the remaining critical path.
2. Calculate the financial exposure under the LD clause and the prolongation claim, and advise the client on the next step.
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LDs are 0.1% of Rs 480 million per day = Rs 480,000 per day. The cap is 10% = Rs 48 million. If four months of EOT are granted, the contractor's culpable delay would be three months (about 90 days), giving 90 × Rs 480,000 = Rs 43.2 million, below the cap. If no EOT is granted, the maximum Rs 48 million would be reached after 100 days. Prolongation at 1.2% per month = Rs 5.76 million per month; for four months that is Rs 23.04 million, but it is recoverable only for employer-risk delay and must be substantiated, and it cannot be claimed for the period of the contractor's own delay. I would advise the client not to deduct the maximum immediately. The client should require a proper determination, issue the required notices, and deduct LDs only for culpable delay after EOT is assessed; otherwise the deduction may be challenged as premature or as a penalty.