A paper given to the Society of Construction Law Hong Kong on 22 September 2004
The question of whether contractors are entitled to payment of prolongation costs as part of the valuation of variations giving rise to the prolongation, or simply to the cost of prolongation has been much debated. In this panel debate, three leading quantity surveyors, each with many years' experience in Hong Kong, gave their views on the matter.
Mr. Charlton's paper considers the background to the traditional approach in building contracts and the relevant provisions in the Hong Kong form, concluding that prolongation costs should be assessed by reference to the actual cost incurred. His paper also considers the position under engineering contracts, concluding that an actual cost approach is also appropriate in that context. Finally he considers whether it is appropriate to make an adjustment for duplication where overheads are recovered both as part of the pricing of variations, and as loss and expense, before concluding with a brief review of other forms in general use.
John Molloy's paper focuses on the position under the HK Government Conditions and their development over a period of more than 30 years. His paper identifies the significant difference in monetary entitlement which may result from an assessment of prolongation costs as part of the valuation of variations on the one hand, or as loss and expense (or cost) on the other, and concludes that the right approach is that prolongation costs should be assessed on the basis of actual costs.
In his paper, John Battersby reviews the background to the debate, and distinguishes the valuation of variations from the assessment of claims for loss and expense, noting that the latter has to be proved, and arguing that where a variation causes prolongation of resources, the correct approach is to assess the contractor's entitlement as part of the valuation of the variations themselves. The paper concludes by considering issues arising from concurrent delay, and whether the valuation or ascertainment of cost should be made by reference to the period when the delay to progress occurs or the period over which the employment of resources is extended.
The authors: Michael Charlton is joint chief executive, James R. Knowles (Holdings) PLC; John Molloy is managing director, James R. Knowles (Hong Kong) Limited; and John Battersby is group managing director of BK Asia Pacific Limited.