Construction projects rarely go exactly as planned. Design changes, delayed access, unexpected site conditions, changes in sequencing, acceleration and other project impacts can increase the cost of completing the work.
When a contractor seeks compensation for those costs, showing the project took longer or cost more is only part of the claim. The contractor must be able to show what happened, who was responsible, how the event affected the work, that notice was provided, and what additional costs resulted. That is why good project records matter.
A contractor should not assume that the entire difference between its original budget and actual project costs is recoverable. Construction projects often experience several causes of delay and increased costs at the same time, and they are not always compensable. The strongest approach is to connect each compensable event to the resulting time and cost impact.
Delay and Disruption Are Not the Same
It is important to distinguish between delay and disruption. Delay generally concerns the effect of an event on the timing or duration of the work. For example, an owner may provide late design information, delay access to the site or direct changes that extend the time required to complete the project.
Disruption generally relates to a loss of productivity or efficiency. Work may become more expensive because it has to be performed out of sequence, trades are stacked, access is restricted or repeated changes interfere with the contractor’s planned method of performing the work. A disruption does not necessarily extend the overall completion date. Disruption is also not, by itself, a separate cause of action. The contractor must first establish a contractual or other legal basis for compensation. The disruption analysis then helps demonstrate the resulting loss.
Choosing the Right Method to Calculate the Loss
There is no single method that will work for every claim. The appropriate approach depends on the nature of the claim and the records available.
Total Cost Method
The total cost method compares the contractor’s total actual cost of completing the work with the amount it was paid under the contract and claims the difference as damages.
The calculation is simple, but the analysis can be difficult to prove. A project can cost more than originally estimated for many reasons, including owner-caused changes and delays, but also estimating errors, contractor inefficiencies, rework and productivity problems.
The concern is that a total cost claim can treat the entire project overrun as though it was caused by a compensable event. Courts therefore scrutinize these claims carefully. The contractor should be able to demonstrate that its original estimate and actual costs were reasonable and that the claimed increase was caused by events for which the other party is responsible. The total cost approach is not prohibited, but it becomes more difficult to support where the records do not allow compensable costs to be distinguished from other project costs.
Modified Total Cost Method
A modified total cost approach attempts to address some of these concerns by making adjustments for factors such as underestimation in the original bid and costs resulting from the contractor’s own inefficiencies or performance issues.
This can provide a more realistic assessment of the loss, but it does not eliminate the need to prove causation. The contractor must still demonstrate that the remaining costs were caused by compensable events.
Measured Mile Analysis
A measured mile analysis is commonly used to assess productivity loss. It compares productivity during an affected period with productivity during a sufficiently comparable period when the relevant disruption did not exist.
However, the comparison must be fair. Other factors that may have affected productivity, such as weather, crew composition, rework, congestion or contractor-caused inefficiencies, should also be considered.
A measured mile analysis does not establish entitlement on its own. The contractor must still demonstrate that the disruption was caused by a compensable event.
Event-Specific Cost Analysis
Where possible, the contractor may be able to identify a particular event and calculate the additional costs associated with it. For example, additional labour, equipment, supervision or site overhead may be tied directly to a specific change or period of delay.
This type of analysis can provide a particularly clear connection between the event and the claimed cost, although it requires detailed project records.
Causation Is Key
Regardless of the calculation method, the contractor must establish the connection between the event and the loss. A delay claim will generally require the contractor to establish:
- Entitlement: What contractual or other legal right gives the contractor a right to compensation?
- Cause: What event or conduct caused the delay, disruption or additional cost?
- Time impact: How did the event affect the schedule? Did it affect the critical path, or simply consume available float?
- Cost impact: What additional costs resulted?
- Quantum: How should those costs be calculated and supported?
A delay to one activity does not necessarily mean that the project was delayed. If there is sufficient float, the activity may be delayed without affecting the project’s critical path or completion date. The analysis can also become more difficult where owner-caused and contractor-caused delays overlap. The contractor may need to distinguish the periods and effects attributable to each cause.
Notice and Record Keeping Matter
Construction contracts frequently contain notice requirements for delays, changes and claims for additional compensation. Contractors should review these requirements and provide notice when a potentially compensable event occurs. Good records are important, but they do not necessarily cure a failure to comply with a contractual notice provision.
Contractors should also document reasonable efforts to mitigate the effects of a delay or disruption, including resequencing the work, moving resources, changing work methods or adding labour or equipment. Important records may include:
- the baseline schedule and schedule updates;
- daily reports and site diaries;
- meeting minutes;
- RFIs and responses;
- change notices, change directives and site instructions;
- correspondence concerning delays and impacts;
- subcontractor notices;
- labour and equipment records;
- cost reports;
- photographs and other site records; and
- contemporaneous explanations of how events affected productivity, sequencing or resources.
Practical Takeaway
A strong delay or disruption claim is not simply a calculation showing that the project cost more than expected. It should tell a clear story: What happened? Who was responsible? What did it affect? For how long? What did the contractor do to mitigate it? What additional costs resulted? And can those costs be demonstrated through the project records? The more clearly the records establish that chain, the easier it is to demonstrate both entitlement and the amount of the resulting loss.
Good record keeping is therefore not just an administrative exercise. It is one of the most important tools a contractor has when it needs to prove a delay, disruption, acceleration or other project-impact claims.
About the Author
Victoria Partington is an associate at Soloway Wright, where she practices general litigation, including Construction Litigation and Commercial Litigation. She joined the firm in 2024 after completing her articles with Soloway Wright. Victoria holds a Juris Doctor from Osgoode Hall Law School and an Honours Bachelor of Arts in Criminology and Criminal Justice from Carleton University.
DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. The information contained herein summarizes only certain aspects of the subject matter and is not a comprehensive review of applicable law. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.
