The contractor is demanding to be paid ‘prelims’ on the extension of time. How is that calculated?
None of the standard forms of contract entitle the contractor to any payment as a consequence of extension of time. The purpose of extension of time clauses is that the period of time available for carrying out the contract Works can be extended. The contractor will look in vain for any reference in the contract to money in connection with extension of time. In short, there is no connection between the contractor’s entitlement to an extension of time and any entitlement to loss and/or expense.
There is no provision for the payment of ‘prelims’ in any of the standard forms. ‘Prelims’ is short for ‘preliminaries’ i.e. the first part of the bills of quantities or specification. When a contractor talks about recovering its preliminaries it means the price for the preliminary items that has been inserted in the bills or specification as part of the tender price. This preliminaries price is often inserted as a lump sum or as a price per week. Obviously a lump sum can easily be converted into a weekly rate, by dividing it by the number of contract weeks.
It was once very common, but now fortunately less so, for the architect to give a contractor an extension of time and then for the quantity surveyor to ascertain the amount payable to the contractor by multiplying the weekly amount of preliminaries in the specification by the number of weeks’ extension of time. As construction professionals better understand their responsibilities in dealing with loss and/or expense, this practice is less common. It borders on negligence unless sanctioned by the employer in the full knowledge of all its implications. The contractor can never be entitled to recover its preliminaries as loss and/or expense, much less as a rate per week of extension of time, because the contractor is entitled to recover only its actual losses or actual expenses – in other words, the amount it can prove it has actually lost or spent. It is not entitled to recover some notional amount, nor the amount inserted as part of its tender price which may, but more likely may not, be the same as its actual costs.
Therefore, the answer to this question is:
1 The contractor is not entitled to any money as a consequence of being given an extension of time.
2 Therefore, there is no need to calculate it.
3 If the contractor makes a valid application under the claims clause (e.g. clause 4.23 of SBC or clauses 4.17 and 4.18 of IC), it is entitled to the actual amount of loss and/or expense it has suffered.