Developing a data centre final account and delay claim

We supported an MEP subcontractor on a European data centre where the direct costs of many changes had been agreed, while their effects on completion and time-related costs remained unresolved. We rebuilt the commercial assessment and prepared the submissions needed to progress the outstanding account.

Background

Our client delivered mechanical and electrical works under a bespoke subcontract worth more than €50m. Substantial design and scope change had affected the installation sequence and completion of the works. Although much of the direct cost had been addressed through agreed variations, the time consequences and a significant balance of additional costs remained disputed.

Commercial discussions had reached an impasse, with approximately €15m separating the parties’ final account positions. Progress required a developed assessment of entitlement and quantum, connecting the additional costs to the events that caused them. We were appointed to establish the commercial position and prepare a case that could support further negotiation or formal proceedings if required.

Our approach

We began with the cost and value position. Going back to first principles, we structured actual costs against the original contract sum build-up and carried out the same exercise for variations. Subcontract packages spanning several systems had to be allocated consistently across the corresponding contract headings. This allowed gains and losses to be understood line by line, so we could investigate the reasons for material differences and assess the contractual basis for recovering additional costs.

The review directed the work towards two principal areas: approximately €7 million to €8 million of prolongation costs and a similar amount associated with work packages, including variations and specialist subcontractor prolongation. Understanding that distinction allowed the delay and package reviews to focus on the events and records relevant to each part of the account.

The extension of time (EOT) case required a detailed forensic delay exercise. A specialist delay analyst used an as-planned versus as-built windows analysis to examine how the critical path changed as the works progressed. The available contract programme had to be reconstructed with the project team’s input, including the sequence of commissioning activities dependent on power being available. Actual progress was established from hundreds of contemporaneous records and thousands of data points, including delivery notes, progress reports, inspections, correspondence and photographs. Six analysis windows tracked the effect of late free-issued equipment and design changes as criticality moved between systems and areas.

We worked with the analyst to understand the relevant events, when they occurred and their duration. Separately, we reconstructed the client’s indirect costs from payroll, supplier invoices and project accounts. Management, supervision, other personnel, travel, accommodation, plant and site welfare costs were brought onto a consistent weekly and daily basis. This produced a cost profile across the project, allowing the costs applicable when each delay occurred to be applied to that event’s duration. Periodic charges were allocated to the periods they related to, with a traceable route back to the source records. The resulting prolongation valuation was adjusted to the net delay period, accounting for mitigation and non-claimed events. The principal submission sought an EOT of around nine months.

The subcontractor account review examined changes for which the client had incurred costs without securing corresponding recovery. We checked the original scope, instructions and amounts already claimed or agreed, then worked with the client’s team to develop the contractual basis and supporting valuation for the outstanding items.

As an example, a previously rejected low-voltage cabling variation required a return to the original estimate and contract documents to establish the agreed design and pricing basis. We identified the cable schedule revision incorporated into the contract, compared it with the final instructed design and quantified the changes in cables and associated components. Each item was valued using the applicable contract rate, with rates derived from comparable items where necessary. Amounts already recognised were reconciled to establish the outstanding balance. This reframed the submission around instructed scope changes and their contractual valuation.

We brought the work together in a revised final account, separating agreed and outstanding elements and explaining the changes to the earlier submission. The account was issued as a payment application, putting the revised evidence and valuations before the contractor for a response and providing the basis for crystallising the outstanding dispute.

Outcome

The client could move forward from the impasse with a clearer understanding of the amounts being pursued, their contractual basis and the evidence supporting them. The itemised account, EOT and prolongation submission, and substantiation for selected disputed variations provided strengthened foundations for negotiation and preparation for third-party proceedings if required. This gave the client greater choice over how to pursue the unresolved account and more control over its next steps.