Loss and Expense

Loss and expense is a formal claim mechanism in construction contracts that entitles a contractor or sub-contractor to recover direct financial costs incurred because of employer-caused delays, disruptions, or failures. The claim must cover "direct" losses - costs that arise naturally from the relevant event - not consequential losses such as lost future business. Under the JCT Standard Building Contract and most other standard forms, the right to claim loss and expense exists as a separate mechanism from the right to claim an extension of time.

What Gives Rise to a Loss and Expense Claim

Under JCT contracts, the employer-side events that entitle a contractor to claim are called "Relevant Matters." These include:

• Failure to give the contractor possession of the site on the agreed date
• Delays in issuing drawings, instructions, or information
• Discrepancies between contract documents
• Changes to design or scope instructed by the architect or contract administrator
• Instructions relating to variation orders or the expenditure of provisional sums
• Disruption caused by works carried out by the client or by other contractors on site

Two categories of cost can be claimed: prolongation costs (additional site overhead, labour, plant, and preliminaries arising from an extended programme) and disruption costs (loss of productivity where works were made less efficient without necessarily pushing the completion date). Both require substantiation with records created at the time, not reconstructed after the event.

NEC contracts use a different term - "compensation events" - for the same concept. The principle is similar: the contractor is entitled to recover financial losses caused by employer risk events.

How to Submit a Loss and Expense Claim

Written notice must be given to the architect or contract administrator as soon as it becomes reasonably apparent that regular progress is being materially affected. Failure to give timely notice is one of the most common reasons claims are reduced or rejected entirely. The notice does not require a quantified figure at the outset, but once submitted, the claim must be supported by detailed cost records.

Typical heads of claim include: site preliminaries and overhead running beyond the original programme, additional labour and plant costs, a contribution to head office overheads, finance charges, and in some cases loss of profit. The claim is limited to direct losses - costs that flow naturally from the relevant matter without requiring separate assumptions about what the contractor might otherwise have achieved.

A claim for loss and expense does not depend on a successful claim for an extension of time. A contractor can suffer significant additional cost through disruption to the sequence of work without the completion date being affected at all.

Contractors who maintain job-level cost records throughout a project - tracking actual costs against the original budget as work progresses - are in a far stronger position when a loss and expense situation arises. Zigaflow's Jobs feature records costs against each job in real time, giving contractors the audit trail that supports a well-documented claim.