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  • Evaluating My Contractor Prolongation Preliminaries Claim

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    vaasto2003
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    The contractor is claiming depreciation costs for construction machinery due to an extended project period. There are a few key points made in the discussion: 1) To evaluate the claim, the contractor needs to provide proof of actual depreciation costs, such as financial records showing depreciation rates used. Relying only on hire rates may not satisfy the strict proof required. 2) The contract terms regarding how loss and expense claims should be assessed need to be reviewed first before determining what level of proof is required. 3) It is important to consider the cause of any extended period and ensure the depreciation claimed is a direct result of actions by the project owner. The contractor's own responsibilities should

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    The contractor is claiming depreciation costs for construction machinery due to an extended project period. There are a few key points made in the discussion: 1) To evaluate the claim, the contractor needs to provide proof of actual depreciation costs, such as financial records showing depreciation rates used. Relying only on hire rates may not satisfy the strict proof required. 2) The contract terms regarding how loss and expense claims should be assessed need to be reviewed first before determining what level of proof is required. 3) It is important to consider the cause of any extended period and ensure the depreciation claimed is a direct result of actions by the project owner. The contractor's own responsibilities should

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    142 views5 pages

    Evaluating My Contractor Prolongation Preliminaries Claim

    Uploaded by

    vaasto2003
    The contractor is claiming depreciation costs for construction machinery due to an extended project period. There are a few key points made in the discussion: 1) To evaluate the claim, the contractor needs to provide proof of actual depreciation costs, such as financial records showing depreciation rates used. Relying only on hire rates may not satisfy the strict proof required. 2) The contract terms regarding how loss and expense claims should be assessed need to be reviewed first before determining what level of proof is required. 3) It is important to consider the cause of any extended period and ensure the depreciation claimed is a direct result of actions by the project owner. The contractor's own responsibilities should

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    Hello.. Need some help here..

    I'm evaluating my contractor prolongation preliminaries claim (we call loss and expenses claim) due to extended the construction period. The contractor is claiming for depreciation of his construction machinery. How can I evaluate the depreciation value and what is the depreciation rate.. Is there any guide or reference we can use to determine the depreciation rate.
    26 days ago

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    Aaron Lu, Prabath Hettiarachchi like this


    16 comments

    Follow Tony

    Tony Lewis It may have gone up in value?...(unlikely but possible)... Its up to the contractor to prove his cost... but remember the hire rate will include depreciation, and operating costs and profit element and establishment and demob if it is static plant. You need the prelim schedule from contractor to help you establish the split of mob/demob, and operating cost (which in theory includes profit - which you do not pay)...so you also need to see the tender analysis which will match to the accepted contract sum... Guides or reference...possibly, but not reliable,...depends on condition, age locality, re-transport etc etc etc.... but the hire rate will cover all of this.
    26 days ago Like

    Reply privately Flag as inappropriate

    Follow Jon E

    Jon E Mizrahi BSc (Hons) DipArb MRICS MCIARB Hi Aaron, Tony is 100% correct!
    25 days ago Like

    Follow L.H.

    L.H. Chin Simple. Ask for his financial accounts and follow the depreciation rate that he used in his financial accounts. He is bound by what he used to determine his yearly company financial statement.

    i.e. If a particular piece of machinery has reached zero value in his books, there is no justification for any depreciation costs since there is none. So if the contractor writes off his machinery assets in let say seven years, then one fast way is to filter out all machinery and equipment that is older than seven years from his entitlement. Believe using hire rate does not satisfy the "strict proof" required when calculating loss and expense due to equipment and machinery assets. As such stand a very high chance of being rejected by the arbitrator.
    25 days ago Like

    Follow Tony

    Tony Lewis LH is correct....hire rate is not strict proof of actual cost..unless the plant is hired in.... and could be rejected in arbitration or ADR. The important aspect is to establish ACTUAL cost...and ACTUAL loss. Hire rate is a good start if there is a build up available, and technically to do it yourself and offer to contractor is wrong also. So it depends on quality of info available..and how far down the line you want to push on way to arbitration, before you end up "doing a deal" to mutual acceptance...The Great British Compromise. Remember your fees may cost you a pretty penny or two...
    24 days ago Like

    Follow Kevin

    Kevin Madden Aaron, you have to have a close look at the contract as well in terms of how you should assess loss and/or expense, As without going into too much detail about the requirements of each particular contract some have provisions which do not have the level of proof for this type of thing and you may be asking for something more than you entitled to. As in any situation I think check the contract first
    24 days ago Like

    Follow Gonzalo

    Gonzalo Lobo Bravo I agree than you should consider carefully the terms of the contract and motivation to an extended construction period. May you could claim losses derived of that extended construction period? I don't know the size of the contract or your responsability but maybe you are trying to calculate something that you should not be thinking about it...
    20 days ago Like

    Follow Martin

    Martin Darley As above advice: check T&C's first, then be careful not to mix rates with costs and/or loss and expense, extending preliminaries implies you are using rates, therefore it is questionable if you can also term thois loss and expense and calculate by an alternative method. The depreciation would alos have to be a direct consequence of the breach. The prolongation must be significant to warrant even looking at this as a head of claim, I would also be countering with contractor culpability.
    18 days ago Like

    Follow seymour

    seymour sealy prolonged time - means prolonged used of equipment which once on project is beleived to be in use just multiple the rental cost of the machinery by the prolonged time and there you are an undisputable figure. eg let say the rental cost of the crane is $y per month and the perlonged period is 3 months $y x 3mts=
    18 days ago Like

    Follow Anwar

    Anwar Sharif i think it is interesting question.the depreciation rate is estimated as per the book value recorded in the accounts department of every company for all the equipments.this can be checked by the suppliers and confirm the rate the contractor is submitting . rate is different from one firm to other .
    17 days ago Like

    Follow Makam

    Makam Subramanyam your cost of plant/machinery/ hour included depreciation cost then why it is required to claim separately.

    16 days ago Like

    Follow Marlon

    Marlon chambers Aaron, i total agree with tony its all in the total Value of the contract
    14 days ago Like

    Follow Emmanuel

    Emmanuel Abankwa I accept all the advice that has been given. But I think in such circumstances, it's always better to make claims for the contractor base on only credible and supporting delays... In terms of lean periods and time delays due to clients default. By this you can actually use daily rate of the machines to determine amount due to make up for the contractors loses.
    12 days ago Like

    Follow howard

    howard gillions easy offer him 50 % of what he claims unless he can prove his cost which he cant no contractor can and settle for around 60-65 which is about right in my book
    2 days ago Like

    Follow L.H.

    L.H. Chin If he cannot prove his cost, then he has no case as the onus of proof is on him. In such cases it is not uncommon for the judge to award a nominal sum of 100 USD on the bsis of the claimant failing in his obligation to prove loss on a balance of probability. So just tell him he is required to show proof of loss and if he cannot, then just reject his claim.
    2 days ago Like

    Follow Marlon

    Marlon chambers i need sum help here if a client stop a job what the contractor should claim for ?
    20 hours ago Like

    Follow Emmanuel

    Emmanuel Abankwa There are rules of engagement in a contract closure. Either the contract ends successfully, abruptly or through termination... There are procedures to follow, whereby claims are made to defray the cost been incurred by the contractor on the basis of the clients stoppage of the works.
    17 hours ago Like

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