THE PROLONGATION COSTS RESULTED FROM THE LATE COMPLETION OF THE PROJECT

SECTION 1.0 - QUANTUM

Introduction

1. As a result of the events and circumstances related to the heads of Claim particulars as fully
detailed in the preceding sections of the Extension of Time Claim submission vide our letter
xxxxxx dated xxxxxxx, THE CONTRACTOR has incurred additional expenditure in respect of the
suspension and delays incurred giving rise to prolongation of the Contract period, disruption
and loss of return on labour and equipment, and the Contractor's site and Head Office
overheads.

2. The Contractor has consistently complied with the notification obligations of the Contract and has
made every effort to ensure that the Engineer and Employer are informed of the implications of
particular events.

3. The time bar provisions of Contract Clauses are deemed to not apply in any case, either under
Contract or under THE COUNTRY law, to the submission of the Contractor’s notices, detailed
particulars, the revised submission of detailed particulars, or the Contractor’s submission of revised
detailed particulars of events with a continuing effect.

4. The Contract does not contain provisions entitling the Contractor to claim additional payment
under the Contract when the Contractor encounters specifically defined, unforeseeable conditions
that causes delay in completion.

5. THE CONTRACTOR has hereinafter included also sums in respect of its expenditure in the
preparation of this submission and financing charges by virtue of the fact that each head of
additional expenditure was incurred.

6. The additional expenditure in respect of the incurred delays has been taken until xxxx (date)
the revised Completion Date of the Works i.e., (xxx) calendar day as delay.

7. THE CONTRACTOR claims additional payment of 87,570,666.00 in accordance with the

provision of the Contract and in particular with respect to the evaluation and application of
additional payments pursuant to General Conditions of Contract (GCC) Clauses 2.8 [Extension
 in Execution Period], 6 [Terms of Payment], 38 [Extension of Time for Completion, 39
[Certificate of Completion of Works] and 42 [Variations] and for which payment is sought
pursuant to Clause 49 [Payments]. (Kindly note that these Clauses are referred to a Client
prepared Contract)

Claims Arising in Connection with the Contract

8. Whereas an extension of time entitlement is generally accompanied by a Contractual

entitlement to additional payment in respect of associated costs, this payment entitlement
does not arise automatically as it is based on the effects of the event or circumstance
claimed, not on the award of an extension of time per se. However, in the case of an
extension of time entitlement that also constitutes a breach of contract, such as a ‘delay,
impediment or prevention caused or attributable to the Employer, a remedy for additional
costs for delay and disruption lies in an entitlement to damages for breach of contract, which
may be claimed under Sub-Clause 39 as occurring ‘otherwise in connection with the
Contract’.
9. With regards to Contractual liability under THE COUNTRY law, Article 124 of the THE COUNTRY
Civil Transactions Law No 5 of 1985 (the Civil Code) states that:-

‘Personal obligations or rights shall arise out of dispositions, legal events and the law, and the
sources of obligations shall be as follows:
1. contracts;
2. unilateral acts;
3. acts causing harm;
4. acts conferring a benefit; and
5. the law.’
10. In the presence of a contract, any liability arising from breaches to the Contract therefore
falls within the scope of applicability of the contractual liability, where the Dubai Court of
Cassation explains that:
“There is contractual liability in the presence of three factors; a fault which occurs when one
of the contracting parties does not carry out the obligations stipulated in the contract or if
there is delay in performing the same; a proven damage; and the presence of causation
between the fault and the damages”.
11. In addition, Article 113 of the Civil Code that sets out:
 “It is the responsibility of the claimant to prove his claim and that of the respondent to refute
it”.
12. With respect to Construction contracts, THE COUNTRY law recognizes the concepts of direct
damages, loss of profits and interest. First, as the compensation for direct damages is not
pre-agreed contractually, then it shall be assessed commensurate with the actual damage
sustained. Secondly, for loss of profits, it is necessary that the occurrence of the damage
should be certain in the future. Thirdly, interest may be demanded up to 12%, but is usually
limited to 9% by the Dubai Courts.

SCL Protocol (1)

13. The guidance for establishing entitlements to an award of an EOT and any award for loss
and expense is provided by the SCL Protocol and case law such as Malmaison(2) . The SCL
protocol has provided guidance to the construction industry on matters of delay and
disruption since 2002 and its adoption is widely accepted as the application of good
practice. Consistent with THE COUNTRY Law, the internationally approved and recognised
objective of the SCL Protocol is to bring reasonableness and fairness into the delay
assessment process and to eliminate unfair manipulation of complex delay issues.
14. The SCL protocol was revised and re-issued in 2017 and highlighted the significant
advantages of the adoption of an As Planned v As Built delay analysis methodology, as the
Contractor has adopted in this submission.
15. With reference to the Core Principles Relating to Delay and Compensation within the SCL
Protocol and the relevant Contract Conditions, the appropriate steps and obligations for
assessing an award of an Extension of Time (and accompanying award for Prolongation) are
as follows:

1
The Society of Construction Law Delay and Disruption Protocol, 2nd Edition, 2017
2 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR32
3 The Society of Construction Law Delay and Disruption Protocol, 2nd Edition, 2017
Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners Intl Ltd EWHC 918 (TCC) (2007)
 Obligation or Step Sub-Contract Conditions
or Authority(3)

The Contractor is entitled to an award of an EOT for Sub-Clause 12 and Core

Employer Delays (Contractor Risk Events) to relieve him of Principles 2 and 3
liability for damages for delay and/or the application of any
penalties.

The Contractor is entitled to an award of an EOT for Sub-Clause 38 and Core

additional or varied work. Principles 2 and 3

Applications and awards should be made close to the event

and/or incrementally. In other words, not left to the
Core Principles 2 and 7
completion of the project.

An award is to be based upon appropriate entitlement and Sub-Clause 49 and Core

not based on need. Principle 5

The Contractor is entitled to be paid costs caused by the Sub-Clause 38 and Core
Employer Delays in a period, notwithstanding that there may Principle 8
be no delay or change to the completion date.

Delays due to concurrent Contractor Delays (Contractor Risk Core Principle 10

Events) do not reduce the Contractor’s entitlement to an
award of EOT for Employer Delays.

The Contractor’s entitlement to recovery of loss and expense Core Principle 14

(Prolongation) is related to Employer Delays, however any
entitlement may be reduced due to the presence of
concurrent Contractor Delays.

16. This submission is structured in compliance with the requirements of the Conditions of
Contract following the guidance and best practice described by the SCL Protocol.

Burden of Proof

17. Civil Code Article 113(4) iobliges the Contractor to prove his right, with the Employer to refute.
Such burdens of proof however are not ‘absolute’ in nature but tempered by the concept of
proportionality enshrined by the parties acting with good faith under Article 246.
The Contractor is therefore required to investigate events on the critical path and events
close to or surrounding the critical path(5). In other words, he is to investigate the Primary
Delays, not each and every possible delay. He is required to provide the necessary dissection
of the events and review what actually happened on the ground.
 This claim is therefore presented compliant with the Civil Code principles of proportionality
to the required burden of proof of:

-----------------------------
3 The Society of Construction Law Delay and Disruption Protocol, 2nd Edition, 2017
4 Civil Code Article 113, Obligator to refute to the mutual extent that the Contractor has to prove. In
other words, the Contractor cannot just say ‘no’ or say ‘I don’t have enough information to
determine’.
5 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners Intl Ltd EWHC 918 (TCC)
(2007)
5
McAlpine v McDermott International (1992)

Additional Expenditure in respect of Delays

18. THE CONTRACTOR's claim for additional expenditure due to the prolongation represents the
additional expenditure it incurred as a result of the delays described prescribed as a result of
which it was required to retain its key staff and resources on site for additional period from
January 21st 2016, the Commencement Date of the Works till April 1st, 2020 the projected date
for completion.

Site Overhead Cost

19. THE CONTRACTOR is entitled to recover the additional expenses of its site staff and
establishment costs for the periods of delay established in respect of the delay events as such
additional expenditure shall be incurred up until the TOC date.
20. The Site overhead costs due to prolongation; as derived from the Contract Bill of Quantities
with the addition of the “Transportation for Contractor's labors and staff” and the Finance
Charges to maintain the Advanced Payment Guaranty”; amounted to 16,638,754 as tabulated
in Attachment (1) to this submission. The cost has been calculated, divided by the full contract
period and multiplied by the relevant delay period.

Site overhead cost to be incurred as additional expenditure resulting from the events causing delays is
equal to 16,638,754.

Head Office Overheads

21. The construction companies normally maintain its Head office to provide a variety of services
 to its operations in projects such as support, supervision, management, planning, research,
policy guidance, accounting and financial support and control.

22. Head office is also the commercial vehicle that accepts final responsibility for Employers and
accepts risks and earns profit for investors.

23. The cost of maintaining this facility includes rental, staffing, legal, financial and other
professional services tendering, pricing, procurement and other company officers' salaries,
indemnities, etc.

24. The cost of maintaining the head office facility running is recovered from the projects. For
these projects, an amount was allocated and included in the Contract Price to be recovered
during the original contract period where it is function of time.

25. The contract period prolonged but the liability of the company to operate remained
unchanged and the cost of the Head Office overheads continue to accrue at the same rate of
recovery as defined in the original contract period.

26. Using corrected Hudson's Formula as explained by the Society of Construction Law Delay and
Disruption Protocol:

The contractor Head Office overhead (as percentage of revenue and as extracted from the
breakdown of BOQ) was equal to 8%

Using Hudson Formula:

Loss of overheads and profit for 616 days =

HO Overheads (Effective Contract Sum)

---------------------- x ------------------------------------------------ x Prolongation =
100 Contract period

8 (164,497,834)
-------------- x ------------------------------ x 961 = 22,187,006.00
100 570 days

27. Head Office loss of overhead and profit to be incurred as additional expenditure resulting
 from the events causing delays is equal to 22,187,006.00

Retention Financing Cost

28. Due to the events and circumstances that were explained earlier in this Claim Submission,
the retention was being held for a longer period than originally envisaged.

Total revised Contract Price 158,247,141.00

Total value of completed Works till Original Contract

completion Date for the month of August 2017
(P.C # 15) 78,598,438.65

Value of delayed section of the Works (1) 79,648,703.00

Expected Retention (10%) of (1) 7,964,870.00

Effective funding period (till TOC) 961 days / 2 = 480 days

Bank funding Rate 9% p.a.

 Retention Funding Cost = (9% ÷ 365) x 961 days x 7,964,870 / 2 = 943,673
(First Half of Retention)

Retention Funding Cost = (9% ÷ 365) x (961-365) days x 7,964,870 / 2 = 585,254

(Second Half of Retention)

29. Retention financing cost to be incurred as additional expenditure resulting from the events
causing delays is equal to 943,673 + 585,254 = 1,528,927.00

Additional cost of Labour and Equipment (Disruption Cost)

30. The Contractor claims that he has partially recovered labour, equipment and plant costs only
during the extended duration for the execution of Works.

31. The basis of claim has been calculated on the generally accepted principles of Hudson's
Formula as published by Sweet and Maxwell, London in Building and Engineering Contracts
(Eleventh Edition) by I. N. Duncan Wallace, Q.C., Barrister at Law where the various elements
are analyzed and calculation made as follows:

Expended Cost =
Original Value ÷ Original Duration (Days) x (Original Duration + Extended Duration
(Days))
Less: Recovered Cost
32. The detailed calculations of the Prolongation Costs are as follows

Original Duration 570 days

Revised Duration till Apr. 01, 2020 1,531 days
Extended Duration 961 days

Final Contract Price 158,247,141.00

Deduct : Preliminaries 8,036,169.00
Net Contract Price 150,210,972.00

Elemental Analysis of Contract Price % Net Contract Price

(Currency)
Material 50.00% 75,105,486.00
Labour 6.00% 9,012,658.00
Plant and Equipment 4.00% 6,008,439.00
Subcontractors 25.00% 37,552,743.00
Overheads 7.00% 10,514,768.00
Profit 8.00% 12,016,878.00
TOTAL 100% 150,210,931.00
 Labour Expended Cost = [9,012,658 ÷ 570 x (570+961)] = 24,207,683.00
Labour Cost Recovered = 9,012,658.00
Plant and Equipment Expended Cost = [6,008,439 ÷ 570 x (570+961)] = 16,138,456.00
Plant and Equipment Recovered = 6,008,439.00

Prolongation Costs Expended Cost Recovered Cost Prolongation

Labour 24,207,683.00 9,012,658.00 15,195,025.00
Plant and Equipment 16,138,456.00 6,008,439.00 10,130,017.00

Total Prolongation cost of Labour, Plant and Equipment = 25,325,042.00

Financing Cost

33. The additional cost incurred due to the delay and disruption caused by the delay events
required THE CONTRACTOR to finance such costs and as such they are entitled to recover such
costs incurred due to its reduced turnover.

34. The Contractor claims additional costs at 9% per annum, being the rate charged by the Bank as
the cost of borrowing and generally accepted by the Departments.

Additional Cost incurred Total Amount

Delay Cost [(Site (OH) + Head Office (OH)- Retention Financing)] 23,429,954.00 (1)
Disruption cost ……………………………………….. 25,325,042.00 (2)

Financing amount 48,754,996.00

Funding period 961 days

Effective funding period (av.) 961 days / 2 = 480 days

Bank funding Rate 9% p.a.

9%
Funding Cost = ----------- x 480 days x 48,754,996.00= 5,770,454.00
365 days

35. The above table values the cost of providing these additional resources on simple interest
basis. The recovery to the actual period of delay and effectively 50% only as costs has been
assumed to accrue proportionately during the delay period.

(1) Delay Cost comprises the Site Overhead and Head Office overhead excluding Retention
Financing Cost.
(2) Disruption Cost comprises the additional cost of labour and
equipment.
Finance Cost for delayed Payments

36. This section deals with the impacts of payment issues on the completion of the project, the
actual payments are dealt with in separate submissions. The Payment issues are listed as
follows:
- Delayed Interim Payments and relative payments of VAT
- Non-Payment of Variations.

37. The Employer has delayed Interim Payments to the Contractor since the beginning of the
project which the Contractor has recorded in the Interim Payment Log and is found at
Attachment (2) to this submission which included the calculation of the interest accrued as a
result of delay of the Employer to pay the Contractor the interim amounts certified by the
Engineer for monthly progress. The impact of the same on the site progress has not been at all
considered by the Employer/Engineer to date.

38. The total aggregate Interim Payment Applications delays by the Engineer (beyond the 15 days
as per the Contract) and by the Employer (beyond the 30 days as per the Contract) were 1,689
days.
39. As can be seen above all Interim Payments to the Contractor were delayed. The unprecedent
scale of delayed payments was not anticipated at the time of Tender and negatively impacted
procurement and by extension the execution of works at site.
40. Delays in certification by the Engineer causes the bank supporting the Contractor to lose
confidence in the Project and generally results in lending criteria being either tightened or
removed completely. Delay in payment by the Employer has the same effect.
41. In order for the Contractor or its Subcontractor to activate a Limited Purchase Order (LPO) with
its suppliers it must first have in place a bank Letter of Credit (LC). The bank will only issue a LC
when sufficient funds are in place.
The bank LCs were delayed due to insufficient funds been in place as a result of delay to IPAs.
This in turn delayed the LPO process with the suppliers.
This delay to procurement had a knock-on effect on site progress in that it delayed and
disrupted the Works.
42. The interest accrued was calculated as 9% for the amounts over the delayed period of each
payment beyond the 60 days payment period allowed to the Employer to effect the payment
under Sub-clause 49.3 of the Contract Conditions.
 43. The overall accumulated incurred costs due to the delayed payment as extracted from the
attached table equal to 2,410,657.00

44. Considering THE COUNTRY law, for the Contractor to absorb effects of the late payments
within its budget and schedule is unfair and could be viewed as Abuse of Rights with the
following definition found at Article 106 of the civil code.

(1) A person shall be held liable for an unlawful exercise of his rights.
(2) The exercise of a right shall be unlawful:
(a) if there is an intentional infringement (of another's rights);
(b) if the interests which such exercise of right is designed to bring about a
contrary to the rules of the Islamic Shari'ah, the law, public order, or morals;
(3) if the interests desired are disproportionate to the harm that will be suffered by
others; or
(4) if it exceeds the bounds of usage and custom.

Loss of Profit and Business Opportunity

45. The Contractor expected to earn its profit on the Contract within the original duration for
completing the Works. The Contractor would then have been able to earn further profits by
utilizing his resources in other ventures to secure further profit.

46. Due to the excusable and compensable delay events cited by the contractor that have extended
the period for executing the Works which were not within the reasonable control, directly or
indirectly, of the Contractor and constituted a prevention caused by the Employer or Engineer
or Authorities and variations to the Contractor’s scope as issued by his representative totally
out with his control, the Contractor had to maintain his resources in completing these Works
and was thus denied the opportunity to earn profit on other ventures.

47. The drastic delay in completion and the occurred relevant cost in addition to exhausting the
Contractor’s resources and finance for almost three times the original construction duration
qualify the contractor to seek an equitable compensation to the Loss of Profit and Business
Opportunity pursuant to clause 38 of Conditions of Contract.

48. The total profit anticipated if the Contractor would utilize its resources in different venue
should be calculated to the same percentage allocated at tender i.e. 8%.
 49. The loss of profit and business opportunity is hereby calculated as follows:

The loss of profit and business opportunity = (effective Contract Price) x 8%

The profit and business opportunity loss = 164,497,833.00 x 8% = 13,159,826.00

Preparation of Claims and Dispute

50. The complexity of the matters described in this claim have required the Contractor to employ
an external claims specialist to analyse and prepare the claims.

51. The Employers referral of the matters to the Dubai courts has required the Contractor to
employ legal representation and to exercise significant management efforts in the meetings
and other activities required.

52. All costs associated with the above would not be required if the Engineer and Employer had
acted reasonably throughout and complied with obligations under the Contract.

53. The Contractor claims a total of 550,000 in respect of the costs of claims preparation and
legal representation, to the cut-off date of this claim submission.
SUMMARY

54. The table shown below consolidates the summary of all additional cost which has resulted from
the delays and disruptions to the Works.

Additional Expenditure in respect of delays

S. No. Description Amount (Currency)

1 Site Overhead Cost 16,638,754

2 Head Office Overheads @ 8% 22,187,006

3 Retention Funding Cost @ 9% 1,528,927

4 Loss of Return on labour and Equipment 25,325,042

5 Financing Cost @ 9% and 50% of the period 5,770,454

6 Finance cost for delayed Payment @ 9% 2,410,657

7 Loss of Profit and Business opportunity @ 8% 13,159,826

8 Cost of Claim Preparation and dispute 550,000

Total Amount 87,570,666