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How to calculate acceleration cost.?

5 replies [Last post]
Sat, 2007-11-24 00:51
Mohamed Basheer
User offline. Last seen 6 years 10 weeks ago. Offline
Joined: 1 Apr 2004
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Hi all,

Our project has been delayed by major design changes by the client. We have submitted an EOT which indisputable. The client is asking us to accelerate with cost implication. We have calculated acceleration cost based on
1. Increase in manpower / supervision.
2. Overtime for extended hours of working.
3. Non cost effective use of machinery
4. Wastage in materials and protective works for the out os sequence works. etc

client’s suggestion is " the above mentioned causes are difficult to quantify instead willing to pay the actual cost above which we are supposed to have spent as per the contract.

Is it ok.?

Second point is , since he is compensating the accelerative measures ,He is proposing to cut the benefit of earlier completion on our EOT cost ( ie prorate management cost )

In that case we are the losers ! What is your assessment of our case please
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Replies

Sun, 2008-01-13 07:39
#1
Bolisetti Jogiraju
User offline. Last seen 5 years 33 weeks ago. Offline
Joined: 7 Jul 2007
Posts: 32
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Hi
Mr.Basheer !

EOT is granted,but on what grounds.
Why its need to know that "Cost" for the EOT to be calculated based on that particular way,not in traditional way of using BQ rates.

If you can provide some more details about EOT,may we find better way to bring your Client into right track.

Cheers
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Tue, 2007-11-27 02:06
#2
Mohamed Basheer
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Joined: 1 Apr 2004
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My apologies Mr.James for the typo error on your name. ( This is terrible thing to do - to misspell the name )
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Tue, 2007-11-27 02:05
#3
Mohamed Basheer
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Joined: 1 Apr 2004
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Thank you very much Mr.Gorden and Mr.Games.

EOT in principle accepted so there will be no question of a penalty. They are not finalizing the cost. We have agreed for the acceleration and the new completion is later than the contract completion but earlier than the EOT completion.

Yes taking the complexity of this matter our HO claims team is working on that.
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Mon, 2007-11-26 09:07
#4
Gordon Blair
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Joined: 29 Jul 2005
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Mohamed,

It sounds as if what your client is actually suggesting is pretty much a move to reimbursable Terms.

Stand firm on the EOT time extension, that’s yours, and your entitled.. particularly if the acceleration strategy was proposed by your Client. You need to make sure that, should the acceleration not achieve the contracted end date for whatever reason, you are covered to your full time entitlement.

As James suggested, intimating to a subbie that you’ll pay whatever it costs over and above the contract value is asking for trouble.. happily that is your Client’s problem, not yours.
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Mon, 2007-11-26 07:51
#5
James Barnes
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Joined: 6 Sep 2007
Posts: 243
Groups: Petro-Chem / Oil & Gas
Mohamed

read the document you’ll find at www.eotprotocol.com this will clarify a lot of things for you I think.

If the client pays for accelleration and this means that the extension costs for the original EOT are mitigated, then your client is correct, they can be deducted. The EOT itself should stand though (thus protecting you from liability if the accelleration measures are less effective than planned)

The EOT in itself only indemnifies you from penalties by extending the contract completion date. The costs claimable should only reflect your actual costs (acting reasonably) plus reasonable profit. As for the cost of accelleration specifically, that you need to demonstrate, but your list of causes seems reasonable to me and should be demonstrable. I don’t really understand tyour client’s suggestion, unless they are suggesting some sort of cost+ approach, which might be possible, but is a terrible way to motivate a contractor, in my experience.

In the end you need someone to look at this claim on your behalf. Either a claims QS within your organisation or someone from outside. I’m sure the situation is complex and so it’s impossible to offer a concise and complete answer to you in a forum post but if your client accepts the need for EOT and their culpability for costs then 80% of the battle is won.
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