Extension of Time: How Contractors Can Survive
Delays and Fight Off Penalties
As a contractor, few things are more frustrating than a
project running past its deadline. But when a delay happens, it isn’t just
about missed schedules—it becomes a high-stakes financial battle.
Suddenly, you are faced with a double whammy: you are
spending extra money keeping your staff and equipment on-site, while the
project owner is threatening you with Liquidated Damages (LDs)—the
corporate word for penalties.
To protect your business, you need to understand exactly how
the project timeline is legally adjusted, who holds the cards, and how you can
get paid for the extra time.
The Three Types of Delays (And Who Pays)
When a project goes over schedule, the Contract
Administrator (the Architect, Engineer, or Project Manager) will investigate
the cause. Legally, every delay falls into one of three buckets:
- Owner-Caused
Delays (Time + Money for You): If the owner hands over the site late,
delays drawing approvals, or orders major changes, they cannot penalize
you. In fact, you are entitled to a formal Extension of Time (EOT),
and you can claim your extended head office expenses using standard
formulas like the Hudson or Emden Formula.
- Neutral
Delays (Time Only): If the project is halted by exceptional weather,
floods, or sudden labor strikes, it is nobody’s fault. You will be granted
an EOT to protect you from penalties, but you cannot claim extra money
from the owner.
- Contractor-Caused
Delays (Penalties for You): If the delay happened because you
mobilized late, managed subcontractors poorly, or faced internal labor
shortages, the owner has the right to enforce Liquidated Damages.
They will deduct a fixed percentage (e.g., 0.05% per day) directly from
your monthly bills.
Who Decides the Fate of the Deadline?
The project timeline isn't arbitrary. The owner cannot
simply wake up and declare you are late.
- The
Baseline: The "Original Completion Period" is fixed the day
you sign the contract.
- The
Judge: During execution, the Engineer or Contract Administrator
acts as an independent judge. They are contractually obligated to evaluate
delay claims fairly. If you prove the owner caused a hitch, the Engineer
is legally bound to push the official completion date forward.
3 Golden Rules for Contractors to Protect
Themselves
If you want to win an EOT and claim your overhead costs,
courts and arbitrators look for proof, not guesswork. Follow these rules on
every project:
- Rule
1: Document Everything Daily. If an owner verbally tells you to hold
off on a section of the site, do not just agree. Send a written email or
entry in the site measurement book that same day confirming the
conversation.
- Rule
2: Give Immediate Notice. Most contracts have a strict "Notice
Period" (often 14 to 28 days). If the owner delays a drawing, you
must formally write to them stating that this event will cause a
project delay. If you miss this window, you may legally forfeit your right
to an extension.
- Rule
3: Update your Schedule. Keep a record of your original project plan
versus actual progress. Show exactly how the owner's delay disrupted your
critical path.
Summary
Maintain a Site Diary/ Daily Log from Day One. Record all important details without fail.
An Extension of Time is your shield against unfair
penalties, and formulas like Hudson are your sword to win back lost overhead
expenses. Don't let owners bully you into penalties for delays they caused.
Keep your paperwork airtight, issue your notices on time, and know your
contractual rights!
