When a contractor claims prolongation cost, the question often arises whether the tender allowance for time-related items is relevant to the calculation. Core Principle 21 of the SCL Delay and Disruption Protocol clarifies the position: tender allowances are not the basis for prolongation cost recovery, but they have evidential relevance to the analysis.
The basis for recovery of prolongation cost is the additional cost actually incurred by the contractor as a result of the compensable delay. This is calculated by reference to the actual resource deployment and actual cost during the period of compensable delay, not by reference to the rates and amounts assumed in the contractor's tender.
However, tender allowances are relevant in three ways. First, they may indicate the contractor's intended resource deployment at the relevant period of the project, providing a sense-check against the actual deployment claimed. Second, they may indicate the contractor's pricing methodology, which can inform the analysis of recoverable overheads and profit. Third, where the contractor seeks to recover for resources that exceed the tender allowance, the difference may require explanation — for example, by reference to scope growth or productivity loss.
A frequent dispute in Middle Eastern arbitrations is whether the contractor's actual prolongation cost exceeds or falls short of the tender allowance, and what consequence that comparison should have. The Protocol's position is principled: under-recovery against tender does not bar a claim if the actual cost is properly substantiated, and over-recovery against tender does not invalidate a claim if the actual cost is properly explained.
A delay expert witness assessing prolongation will typically examine the tender programme, the tender resource histograms, the contemporaneous resource records and the actual cost incurred during the relevant period. The expert will then opine on whether the claimed cost is a reasonable reflection of the actual cost caused by the compensable delay — taking the tender allowance into account as an evidential reference point but not as a determinative figure.
Contractors should retain their tender build-up documents and resource plans, and quantum experts should review these alongside the contemporaneous cost records. The combination produces a more credible prolongation claim and a more defensible position before the tribunal.