Prolongation costs are the additional time-related expenses a contractor incurs when the project duration is extended due to events that are the employer's responsibility. While the extension of time entitlement determines how many days the contractor is entitled to, the prolongation cost claim determines how much money that additional time costs. Getting this calculation right — and substantiating it properly — is essential for recovering legitimate costs.
What are prolongation costs?
Prolongation costs are the costs that continue to be incurred for every additional day the project runs beyond the original contractual completion date due to employer-caused delays. They are sometimes called "time-related costs" or "extended preliminaries." Typical prolongation cost elements include site management and supervision staff, site accommodation and facilities, plant and equipment on hire or standby, utilities and consumables, insurance premiums for the extended period, bank guarantees and bond costs for the extended period, head office overhead attributable to the project, and financing costs on delayed payments.
The link between EOT and prolongation
A prolongation cost claim requires a successful extension of time claim as its foundation. You must first establish that the project was delayed by employer-responsible events and quantify the period of delay through a proper delay analysis. The prolongation cost calculation then applies to that established period. Without a valid EOT, there is no entitlement to prolongation costs — even if the contractor actually incurred additional time-related expenses.
Step 1: Identify time-related cost categories
Review the project cost structure and identify all cost elements that are genuinely time-related — meaning they continue to be incurred for each additional day the project runs. Fixed costs (such as a one-time mobilization charge) are not prolongation costs. Variable costs that depend on work volume (such as materials) are not prolongation costs unless they increased specifically because of the extended duration. The test is simple: would this cost have stopped or reduced if the project had finished on time? If yes, it is a prolongation cost.
Step 2: Establish the cost rates
For each time-related cost element, establish the daily or monthly rate. The preferred approach is to use actual recorded costs from the project — payroll records for staff, hire agreements for equipment, invoices for facilities. If actual records are incomplete, tender rates can be used as a starting point, adjusted for any known differences between planned and actual costs. Be transparent about the source of your rates. A claim that uses unsupported rates will be challenged — and rightfully so.
Step 3: Apply costs to the delay period
Multiply each cost rate by the number of days or months in the established delay period. This sounds straightforward, but the complexity arises when costs did not continue at the same rate throughout the delay period, some resources were demobilized and remobilized during the delay, the delay period overlaps with periods of contractor-caused delay, and some costs are shared between the delayed project and other projects.
Address each of these transparently. If a staff member was reassigned during part of the delay period, only claim for the time they were actually on the project. If there was concurrent delay, apportion the costs fairly.
Step 4: Head office overhead
Head office overhead is the most frequently contested element of prolongation claims. Two established formulae are commonly used: the Emden formula, which calculates the proportion of head office overhead and profit attributable to the delayed contract based on the company's audited accounts, and the Hudson formula, which uses the tender percentage for overhead and profit applied to the contract value and delay period. The Emden formula is generally preferred because it uses actual audited figures rather than tender assumptions. Whichever formula you use, be prepared to provide supporting evidence — audited accounts for Emden, tender documents for Hudson.
Step 5: Present clearly
A well-presented prolongation cost claim includes a summary table showing each cost category, rate, period, and total amount, supporting documentation for each rate, cross-reference to the delay analysis showing the entitled EOT period, and a clear statement of the total prolongation cost claimed. Avoid inflating claims with speculative or unsupported items. A conservative, well-documented claim is far more likely to succeed than an aggressive one that includes everything imaginable.
Common mistakes
Claiming prolongation costs without first establishing a valid EOT entitlement is the fundamental error. Including costs that are not genuinely time-related weakens the entire claim. Using tender rates without adjusting for actual costs creates credibility issues. Failing to account for concurrent delay periods where costs should be shared or excluded will be identified and challenged by the other party.
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