You are a general contractor. The project has been delayed 200 calendar days. You contend the owner and the owner’s consultants caused delays to the critical path. You submit a claim for extended general conditions / extended field overhead associated with the 200 day critical path delay. How do you calculate the costs associated with this 200 days of compensable delay? Calculate a daily rate!
The most frequently used method [to calculate extended general conditions] is to compute a daily rate by dividing the total general conditions costs on the project by the total days of contract performance and then multiplying the result by the number of days of compensable delay. An alternative method would be to determine the actual costs curing the actual delay period.
The Clark Construction Group, Inc., GAOCAB No. 2003-1, 2004 WL 5462234 (November 23, 2004) (internal citations omitted).
Construction contractors may carry field office costs, such as project supervision and administration, as direct costs to the job where the costs are specifically identifiable with that one project. In a compensable delay situation where project supervision and administration are carried as direct costs, an equitable adjustment for extended field supervision and administration is calculated as a direct cost item. Field overhead which is charged, for example, to a G&A expense pool as indirect costs should not be commingled in the direct cost calculation. Where it is impracticable to derive actual cost data during the delay period, one recognized measure of the direct costs for extended labor supervision and administration is to compute a daily rate by dividing total labor supervision and administration costs on the project by the total days of contract performance and then multiplying the result by the number of days of compensable delay. To the extent that the contractor already has recovered some field supervision costs during the delay period as part of another equitable adjustment under the contract, those amounts must be deducted from the amount of recoverable extended field supervision costs.
MCI Constructors, Inc., DCCAB No. D-924, 1996 WL 331212 (June 4, 1996) (internal citations omitted).
For example, in the appeal of MCI Constructors, the board of contract appeals determined that a contractor incurred a total of direct time-related general conditions in the amount of $303,624.80. The total contract period was 802 days, which resulted in a daily rate of $378.58. The board multiplied this daily rate by 252 days of delay to yield extended general conditions of $95,402. The board then reduced this amount by duplicative overhead markup included in other change orders.
In another example, in the appeal of The Clark Construction Group, the contractor had an original budget for general conditions in the amount of $2,540, 727. However, shortly after contract award, the contractor realized that it underbid general conditions by $344,527. In actuality and as the result of a delay, the contractor incurred $2,910,673 in general conditions costs through the substantial completion date. But, because the contractor originally underbid this amount, its actual general conditions costs ($2,910,673) were adjusted downward by the underbid amount ($344,527) to total general conditions of $2,566,146. (The reason the general conditions were adjusted downward due to the underbid amount is to put the contractor in its original position in determining its delay costs versus giving the contractor the benefit of a windfall when it originally underbid the amount.) Then, the general conditions of $2,566,146 were divided by the duration of the project (1,066 days) to come up with a general conditions daily rate of $2,407.27. This daily rate was multiplied by the number of days of delay to determine the contractor’s extended general conditions associated with the delay.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.